Q1 2027 KDDI Corp Earnings Call - Q&A

Speaker #1: Ladies and gentlemen, thank you very much for attending the earnings briefing dispatcher busy schedules. I would like to brief you on the financial results of the first quarter of fiscal year ending March 2027.

Speaker #1: First and foremost, I would like to express my most heartfelt and deepest sympathy to all those affected by the 2026 Kumamoto earthquake and their families.

Speaker #1: We will leverage the lessons learned from past disasters in our effort to restore the telecom services in the areas affected, we have restored base stations using Starlink as backhaul lines utilizing mobile base stations and portable power generations, and restore services as of July 30.

Speaker #1: To support the areas affected, we have been providing water services from vehicle-type AU shops, responding to customers' problems with respect to communications and devices aided by, and have also aided in recharging services with all four carriers.

Speaker #1: We are also performing drone inspections in areas that are inaccessible. KDDI will continue to listen to the voices of those in the affected areas and work across the group to do our utmost to support the recovery effort.

Speaker #1: These are the key highlights for today's presentation. First, I will explain the financial results of Q1 of this fiscal year ending March 2027, and the key areas of focus for achieving our full-year targets.

Speaker #1: Following that, I will discuss our efforts to strengthen corporate governance in response to inappropriate cases and incidents of unauthorized access. Finally, I will provide an update on the progress of our midterm management strategy, Power to Connect 2028.

Speaker #1: First, on the consolidated financial results of Q1 of this fiscal year ending March 2027. First quarter revenue and profit both increased, marking a strong start to the fiscal year relative to our full-year forecast.

Speaker #1: On the left, operating revenue was $1 trillion 487.3 billion yen, up 5.1% year-on-year. Representing a progress of 23.2% of the full-year plan. In the middle, adjusted operating income was $314.3 billion yen, up 21.1%, representing progress of 26%.

Speaker #1: On the right, adjusted profit for the period was $193.4 billion yen, up 21.6%, representing 26.5% of the full-year plan. As you can see, in Q1 we were up 21%, building a strong momentum.

Speaker #1: We're off to a solid start under our midterm management strategy. Next, operating revenue by segment. For the first time, we are disclosing revenue for the new segments as well as sub-segments.

Speaker #1: This reflects our determination to drive steady growth across all areas including our top line. As you can see, operating revenue increased across all segments.

Speaker #1: Mobile communications, which constitutes telecom core, and key growth areas such as finance and data centers are also growing steadily. These are factors for changing adjusted operating income.

Speaker #1: Mobile communications revenue drove the increase in profit growth areas also made steady progress toward double-digit growth for the full year. From the left, telecom core posted a year-on-year increase of 34.4 billion yen, of which mobile communications revenue accounted for a year-on-on increase of 18 billion yen.

Speaker #1: Communications revenue is growing steadily. These are the factors affecting changes in adjusted operating income. In Q1, mobile communications revenue drove the increase in profit. Growth areas also made steady progress toward double-digit growth for the full year.

Speaker #1: For the full year, as shown on the right, we are firmly aiming for our initial forecast of ¥1,210 billion. Key KPIs are improving thanks to our lifetime value (LTV) focus initiatives, as shown on the left.

Speaker #1: With price revisions, KPIs for respective brands all improved. We're seeing this as an encouraging sign for continued increase in profit into the second half.

Speaker #1: Personal growth posted an increase of 4.7 billion yen, up 9.3%. Business growth saw an increase of 3.3 billion yen, up 21.6%. In total, an increase in the adjusting operating income of 54.8 billion yen.

Speaker #1: The number of active smartphones in Q1 was 33.3 million, an increase of 390,000 year-on-year. Additionally, the churn rate was 1.17%, a significant improvement of 0.06%.

Speaker #1: We will spend cost of investment for strategy and we will continue to make effort to achieve our full-year earnings forecast of $1 trillion 210 billion yen.

Speaker #1: Points year-on-year. On the right, mobile ARPU in Q1 was 4,400 yen, a year-on-year increase of 160 yen, a substantial 3.8% growth. The number of subscribers on top-tier plans across all brands is expanding steadily, laying the foundation for profit growth in the second half of the year.

Speaker #1: Next is on progress we have been making in mobile structural transformation since last fiscal year. Our LTV focus initiatives, which we implemented ahead of our competitors, have paid off on key KPIs are improving.

Speaker #1: Fiscal year. Next, here's an overview of our growth areas for FY27 March. On the left, personal growth. First quarter operating income for personal growth grew 9.3% year-on-year, with all five sub-segments performing well.

Speaker #1: Please look at the left-hand side. Regarding smartphone IDs and churn rate, the number of active smartphones in Q1 was 33.3 million, an increase of 390,000 year-on-year, and churn rate improved significantly to 1.17%, a decrease of 0.06 percentage points year over year.

Speaker #1: On the right, which is business growth, operating income grew 21.6% year-on-year, with all five sub-segments reporting increases in both revenue and profit. Following this, I will explain the key points for each business segment.

Speaker #1: So, as I said, the number of active smartphones in Q1 was 33.3 million, an increase of 390,000 year-on-year, increase quarter on quarter as well.

Speaker #1: First, regarding the financial business, au Financial Holdings' operating income for Q1 was down ¥3.7 billion year-on-year, but this was in line with our expectations.

Speaker #1: Breaking away from promotion expense-based competition is not as easy to practice as I said, but we implemented such major structural transformation tenaciously at the front line of sales and as a result, commendably, the front line enabled us to reduce churn rate by 0.06% and increase users by 390,000 at the same time.

Speaker #1: In addition to the challenge of increasing deposits, a key issue for a bank, we had factored in the impact of mark-to-market losses due to rising interest rates into our forecasts.

Speaker #1: At the start of the fiscal year, excluding these factors, our core credit card and banking businesses are growing steadily, and we are moving forward with measures to further strengthen them.

Speaker #1: And on the right, regarding mobile RPU, it reached 4,400 yen in Q1, a year-on-year increase 160 yen, up substantially by 3.8%. The strong performance is driven not only by service revisions but also by steady expansion of subscriber numbers for the top-tier plans with the AU and UQ mobile brands, respectively, laying the foundation for increased profits in the second half of the year.

Speaker #1: Next, I will discuss our devices business and loss on point-of-pass. On the left, revenue from device-related services and point-of-pass is growing, and active user rates are also improving.

Speaker #1: On the right, we are making progress in creating value in partnership with Lawson.

Speaker #2: AI integration.

Speaker #1: Next is AI integration. Combined, AI integration and cybersecurity Q1 revenue grew at a solid 9.1–9.2% year-on-year. A secure cloud environment is a prerequisite for AI implementation, and we leverage the group's strength to accelerate implementation support.

Speaker #1: We remain committed to value competition to further strengthen our competition advantage. The diagram illustrates the approach we have been promoting since last fiscal year.

Speaker #1: We have focused on driving RPU growth through value creation at the time of subscription and after, and as well as reducing churn rates by extending contract duration, thereby maximizing LTV.

Speaker #1: At present, we are focusing on expanding our cloud infrastructure, with Q1 revenue growing by more than 30% year-on-year. The Connectivity Data Center is capturing AI inference needs, with Q1 operating revenue growing a solid 20.6% year-on-year.

Speaker #1: We have three brands altogether. So later, for each of the brands, I would like to explain the status. First, our main brand AU. AU aims to be an attractive flagship brand that continues to be customers' first choice by delivering reliable connectivity anywhere, on the left.

Speaker #1: As more customers recognize these values, we are seeing progress in switches to AU. That's one of our KPIs. So UQ to AU, AU to UQ.

Speaker #1: EBITDA also grew similarly year-on-year, with the EBITDA margin exceeding 40%. We will continue to capture growth opportunities accompanying the spread of AI. Next, in relation to the inappropriate transaction, I will discuss the progress of our group governance strengthening and recurrence prevention measures.

Speaker #1: This is the migration KPI. Those who stay on AU and those moving from AU to UQ, there were increases in such customers. So this resulted in customers migrating from UQ mobile, increasing approximately 170,000 year-on-year.

Speaker #1: At the top, by June of this year, we completed comprehensive inspections of the 110 target companies and have been developing new rules and structures.

Speaker #1: We are now operating and monitoring the new rules under the new structure. In the meantime, to build relationships of mutual trust, the top management visited major strategic subsidiaries and held dialogue sessions with the top executives of group companies.

Speaker #1: On the right, the foundation for these achievements is reliable connectivity. While there are now significant differences in network quality and coverage among telecom carriers, AU's network quality stands out.

Speaker #1: At the bottom, in terms of AI and system utilization, we have introduced an AI system for credit screening and an anomaly detection tool using financial data.

Speaker #1: Our 5G SA population coverage rate exceeds 90%, and the number of users of AU 5G fast lane, which allows customers to experience this quality firsthand, has surpassed 3.1 million.

Speaker #1: Going forward, we will begin using these under the new rules and continue development toward comprehensive use of AI in our systems. Regarding the recent unauthorized access incident affecting the email system provided to ISB operators, we take the administrative guidance seriously and will do our utmost to prevent recurrence. We will work to improve and raise awareness of security standards across the industry.

Speaker #1: Furthermore, AU Starlink Direct, which we launched ahead of our competitors, has begun offering international roaming and has established a system capable of responding to SOS calls.

Speaker #1: From areas outside our coverage, next is UQ mobile. This brand is a crucial one at mid-price point as both entry point for new subscriptions and the gateway for migrating to AU.

Speaker #1: In light of the issues brought to light, to strengthen security, we are using Frontier AI to conduct vulnerability diagnostics, among other measures. I will also report on progress in improving management quality, which is one of the important things in this midterm period.

Speaker #1: This time, we have come out with a new plan by bundling financial services with mid-range data service called UQ KomiKomi Otoku Discount. Offering simplicity and value by adding the financial benefits of a gold card to our offerings.

Speaker #1: On the left, core free cash flow—the source of funding for growth investments—and its margin have remained stable. The operating cash flow margin also stands at 21.6%, further strengthening the fundamentals for growth investment.

Speaker #1: Since we launched this in June, it has already proven effective. Leading to a roughly 2.1-fold increase in the number of customers choosing this top-tier plan, KomiKomi plan value and roughly 1.6-fold increase in gold card selection rate at the time of card issuance.

Speaker #1: In addition, we are strengthening our review structure for growth investments and expanding our pipeline. On the right, so far this fiscal year we have decided on 11 divestments, which is generating approximately ¥150 billion in cash.

Speaker #1: Next is Pebble. Pebble's strength lies in its flexible approach to value-based competition built on high-quality AU networks. Pebble services can be chosen and mixed to meet customer needs, allowing us to reach a wide range of customers that AU and IQ mobile cannot reach.

Speaker #1: We will continue to review investment efficiency and strategic rationale, and proceed with the review of our business portfolio. Finally, today's summary is presented here, as shown.

Speaker #1: To respond to requests from customers wanting to use unlimited data or to easily purchase additional gigabytes, we began offering services like toppings. As shown on the right, as a result, the number of customers switching from other carriers has increased 4.44 since launch, and the number of gigacharge cards sold at GoSun has grown approximately 4.3-fold year over year.

Speaker #1: In addition, as an opportunity to further deepen your understanding of our strategy and businesses, we are also considering holding an IR Day in mid-September.

Speaker #1: We will provide the details once they are finalized. We will continue to drive our initiatives forward to achieve our full-year forecast. Thank you very much for your attention.

Speaker #1: This is demonstrating effective synergy with GoSun. Next, I will explain our key priorities for FY27 March in the growth areas where we have demonstrated our commitment to growth.

Speaker #1: As part of our mid-term management strategy, first, I will provide an overview of our initiatives aimed at achieving our four-year forecast for year 27 March fiscal year.

Speaker #1: Ms. Sashoshi, thank you very much for the presentation. At this moment, we would like to take questions from the audience. Those of you with questions, please use the hand-raise icon on Zoom or the hand-raise button within the reactions.

Speaker #1: On the left, personal growth. First, quarter operating income grew 9.3% year-on-year, with all five areas performing well. And on the right-hand side, business growth grew by 21.6% year-on-year, with all five areas posting increases in both revenue as well as profit.

Speaker #1: If you're cold, please announce your affiliation and name and tap the mute release to ask questions. In order to take as many questions as possible, we would like to limit the number of questions to two per person at a time.

Speaker #1: If you have two questions, please ask your questions one at a time. We may not be able to take your questions if you do not state your name or affiliation.

Speaker #1: After this, I would like to explain about our key priorities for the full year. First, regarding financial business within personal growth, in Q1, AU Financial Holdings' operating income was down 3.7 billion yen year-on-year.

Speaker #1: We will take questions until the scheduled time. From Data Securities, please unmute and start your questions. Can you hear me? From Data Securities, I have two questions.

Speaker #1: Question number one: it's about Rakuten roaming. I think it's because of the press conference, but each media outlet is saying that the roaming service will end at the end of September.

Speaker #1: But this was in line with expectation because in addition to increasing deposits for the bank, we had already factored in the impact of mark-to-market losses resulting from rising interest rates at the start of the fiscal year.

Speaker #1: However, for some rural areas, the service will continue, while some media also report that it's still under negotiation. So, what are the facts, if you could summarize them?

Speaker #1: Excluding these factors, our main businesses are growing steadily. The number of gold card members in Q1 reached 2.07 million. An increase of 460,000 year-on-year AU Jibun Bank's deposit balance grew 1.2 times year-on-year.

Speaker #1: If a decision is almost made, what would be the impact on your revenue? Would it bring down your revenue? And talking about rural areas, well, to what extent are you providing your roaming service outside of rural areas?

Speaker #1: So, if you could please share these facts—that's my first question. Thank you for your question. So, our contract on Rakuten roaming—what will happen to that?

Speaker #1: To further expand the base, we will strengthen collaboration on plans with UQ mobile. As explained earlier, and offer instant credit card issuance from AU pay up in July for the first time.

Speaker #1: And as changes are made, what would be the impact on our revenue and our financial performance? I understood the questions to be those. Now, first, regarding our contract with Rakuten, what we're saying is that we have already played a certain role for Rakuten already.

Speaker #1: The number of credit card issuance increased by 1.2 times, and the use of auto charge went up by 20% as well. Next, we would like to take a look at devices.

Speaker #1: That's our understanding. To Rakuten Mobile, in order to supplement population coverage for seven years, we have been providing roaming services. Rakuten's service coverage is expanding based on that.

Speaker #1: GoSun PontaPass. As businesses, essential for maximizing LTV, device-related revenue and PontaPass revenue are growing, and active user rate of PontaPass is also improving. As smartphone prices continue to rise, due to storing memory costs, the customers' cost burden for replacing devices is rising.

Speaker #1: We believe that we have already played a major role for them. So, for the current agreement, at the end of September, it will be terminated.

Speaker #1: So, why are we doing this? We have our own customers at KDDI. We want to maintain the quality for our own customers. au, UQ mobile, and povo users' telecom quality must be protected firmly.

Speaker #1: We must make devices durable with repairs and warranties so that they can be used longer and also expand the option of used devices through that.

Speaker #1: There is still room for growth in device-related revenue. On the right, we are continuing collaboration with GoSun. This July marked the first anniversary of the opening of our Takanoa pilot store.

Speaker #1: So depending on the situation, we would like to take a firm attitude in order to protect the quality. So the current agreement with Rakuten will be brought to a close, but the way in which we compete and collaborate will continue to be considered, and will be limited to some of the rural areas for a certain period.

Speaker #1: So based on the insights and data learned through the past year, we will leverage our first movers advantage to create value for the next generation CV stores ahead of our peers.

Speaker #1: We will cooperate with Rakuten so that they can maintain their infrastructure. That was what was agreed upon with them. For the limited rural areas, within a certain timeline, Rakuten will be building their own infrastructure.

Speaker #1: Next, I will discuss AI integration in the business growth domain. AI docent is now the top priority for every business leader. However, at many companies, the proprietary data they want to use for AI remains dormant on on-premise systems.

Speaker #1: That is what we have negotiated with Rakuten. That is where we are currently. What will happen to roaming revenue then? The impact on Q1, year on year, will be about ¥800 million.

Speaker #1: Moving this to the cloud, and establishing a secure environment presents a major business opportunity. Our group company KDDI IRET has a track record of cloud implementation at 2,500-plus companies and holds 8,000-plus AWS Google Cloud certifications, giving it top-class technical capabilities with KDDI's corporate customer base of 400,000 companies, we will further expand the cloud infrastructure that underpins AI adoption.

Speaker #1: And in terms of our four-year guidance, conservatively, we have not factored in the agreement after September. So we're not factoring in that service in our performance from September onward to be conservative.

Speaker #1: But as was mentioned, for some rural areas, we will continue to provide roaming service for Rakuten. So, in the second half, there will be some revenue generated from that.

Speaker #1: This business got off to a solid start this fiscal year with Q1 infrastructure sales growing by 30% year-on-year. On top of that, we will cross-sell integration, maintenance, and operations to build an even stronger revenue structure.

Speaker #1: However, I'm sorry, but I will have to refrain from giving you a specific number regarding that. That will be all. Thank you. Just one point of follow-up.

Speaker #1: So, in order to protect the traffic of your own users, you said, after the end of September, how much quality improvement can be expected for users' traffic?

Speaker #1: Furthermore, combined with building a sovereign environment that Sakai AI data center, we aim to provide end-to-end solutions spanning the digital belt through AI-enhanced lifestyle and AI-powered productivity.

Speaker #1: And may I expect that quality will increase also in urban areas? Yes. Naturally, we're going to prioritize our own users, and quality will be improved. Quantitatively, how much improvement—it's hard to say.

Speaker #1: Next, on connectivity data center, both operating revenue and EBITDA grew year-on-year with the EBITDA margin exceeding 40%. This is the characteristic of connectivity data center.

Speaker #1: So I shall refrain from making quantitative comments at this moment. Thank you. My second question is as follows: It's about your peers in the industry.

Speaker #1: Behind this is the need for AI inference. Companies that use AI need to process data at high speed, close to their users. Our data centers are located near cities where customers are concentrated, allowing us to provide a low-latency environment.

Speaker #1: So, your price revisions went very well, and for this particular quarter, it contributed to an increase in revenue and profit, as well as a reduction in churning rate. SoftBank has decided on price revisions, and Docomo are also continuing to consider price increases.

Speaker #1: As this aligns with such needs, we secured orders in Q1 in multiple regions including France and Canada. In France, a key area of focus we have announced a strategic partnership with one of France's leading sovereign cloud operators, by combining our number one connectivity position in France with our partner sovereign cloud infrastructure, we will strengthen our ability to meet the growing demand in Europe for secure AI inference environments.

Speaker #1: So, you have changed your prices once. But once that round is over, are you considering a second round of price hikes? To what extent are you considering that? The feel that I have is that, compared to your peers, you have relatively cheaper plans.

Speaker #1: So there may be potential room for further price hikes. What are your thoughts? Thank you for your question. So, price hikes, price increases.

Speaker #1: "Would there be a second round of price hike?" was your question. Regarding that, I would like to turn to Asakisa, who is responsible, for an answer.

Speaker #1: So from here, I will explain our initiatives for strengthening governance. First, in relations to the inappropriate transactions, I will explain the progress on our efforts to strengthen group governance structure and reoccurrence prevention measures.

Speaker #1: Thank you very much for your question. Last year, we led a price change—we increased our prices. It’s been accepted by our customers and our peers in this industry.

Speaker #1: At the top, by June of this year, we will complete we have completed comprehensive inspections of the 110 target companies and have been developing new rules and structures.

Speaker #1: Are making the same move. They're changing their plans to appeal quality over quantity. And au's price has changed. Back in August, it's almost a year since, and what's going to be our next set of measures in the plans? We introduced au Value Link Plan.

Speaker #1: We are now operating and monitoring the new rules under the new structure. So we have thoroughly implementing this. In the middle, regarding building close trust-based relationships, between the group companies, we have conducted visits by top management.

Speaker #1: We also had a campaign, Komi Komi Value. The prices for these plans are penetrating quite well. There's been good progress made with that. It's not just impact from price revisions, but with improvement in plan makeup, communication revenue is up.

Speaker #1: We had the management visit 14 major strategic subsidiaries and held dialogue sessions with 93 top executives from group companies. And below, you will see in terms of AI and system utilization, we have introduced an AI system for credit screening and an anomaly detection tool using financial data.

Speaker #1: So by increasing the penetration of these plans, we would like to continuously raise revenue from communications. That is what we will continue to do.

Speaker #1: And for the next round of price hikes, there's nothing that we have decided at this moment. However, from our perspective, we would like to focus on value.

Speaker #1: How can we translate value into the price that customers pay? We would like to continue to be the trendsetter. We are always considering that aspect.

Speaker #1: Going forward, we will begin using these under the new rules and continue development toward comprehensive use of AI in systems. Regarding the recent unauthorized access incident involving the email system provided to our ISP business partners, we take the administrative guidance seriously and are putting our full effort into preventing reoccurrence and we will work to improve and raise security standards across the industry as a whole.

Speaker #1: And so, by looking for opportunity and taking action if necessary, if we can change the price again, we would like to return part of that to our partners.

Speaker #1: And that cycle shall continue. So there's nothing decided specifically with respect to the next round of price hikes. Thank you very much. May I ask a follow-up question?

Speaker #1: So in this particular quarter, organically, mobile communication—how much is it increasing? And I'm sure you're considering a second round of price hikes. As you do so, what are the terms and conditions that you are most focusing on, if you can disclose them?

Speaker #1: The left side shows an overview of an unauthorized access incident. We have email address and some passwords that have been accessed illegally or inauthorized manner.

Speaker #1: Just to share a thought on that as well—well, thank you for your question. Telecom revenue this quarter has gone up, and of course, a large part of that is because of the price hike.

Speaker #1: The first issue was that there was an unknown vulnerability that was exploited in a software product that was not even known to the vendors.

Speaker #1: But Value Link Plan is penetrating more, and Komi Plan is also making good inroads from UQ to au sell-up or migration compared to last year.

Speaker #1: So we don't want to look at this just as an unknown vulnerability. But we will utilize AI as a power and speed of AI-driven attacks will also increase going forward so that we can implement tools to proactively check for potential issues even the unknown ones and the second issue was that on top of the exploited vulnerability, the email system had a mix of legacy communication protocols.

Speaker #1: It's been up substantially, so such effects are also included. I cannot give you a specific breakdown of such effects, but they're making progress above what we initially expected in our plan.

Speaker #1: So, what about the conditions for the second round of price hikes? I'm sure there are a lot. Well, going forward, while prices will be—we are competing harshly with our peers and the quality of telecommunication services.

Speaker #1: So this was another reason for the incident revealing multiple security issues. We will work with our ISP partners to migrate early to protocols with higher security strength.

Speaker #1: Not limited to the system that was subject to an unauthorized access this time, we are conducting vulnerability assessments across our entire system portfolio prioritizing it accordingly.

Speaker #1: We would like to continue to create value, centering on those aspects. We will continue such efforts. Thank you very much. Well understood. Mr. Tokunaga, thank you.

Speaker #1: So, next question is from Mr. Matsuno from Nomura Securities. Please unmute. Matsuno from Nomura Securities. I have two questions. So, first question: as you have discussed, you are now shifting gears to value-added management.

Speaker #1: We are moving at an accelerated pace with milestones depending on the priority but set for end of September or by the end of the year.

Speaker #1: Lastly, I will explain the progress of our midterm management strategy power to connect 2028. So in our midterm management plan, we declared our aim to become a front-runner leading the social implementation of AI-powered productivity and AI-enhanced lifestyle with the customers as our starting point.

Speaker #1: So, as a result, in the first half, in terms of prices and in terms of planned mix, I think you are able to become sufficiently profitable.

Speaker #1: So, you will make progress in the second half. As you said, you need to accelerate growth areas. As you mention on page 15, you have business and growth, and for personnel you have the four: AI integration, connectivity, data center, and financial business. Then, how much can you accelerate these businesses in the second half?

Speaker #1: In AI-powered productivity, we contribute to our customers' business growth while AI-enhanced lifestyle transforms customers' daily lives and experiences. The digital belt supports both of these.

Speaker #1: Today, I will report on three points regarding the progress of our midterm strategy. First, as an example, of AI-powered productivity, let me introduce AI excuse me, AU sales support AI case.

Speaker #1: So, you have the first half good results, and you have the basis. Improvements have become a cash card. So, what is your interest in terms of the acceleration of the growth?

Speaker #1: Personally, this is a solution that I think is a barrier our carrier shops provide a wide range of services tailored to customers' daily lives.

Speaker #1: Thank you very much for the question. So, in terms of the first half, let me speak about the first quarter. In terms of performance, it is trending extremely well.

Speaker #1: On the other hand, the difficulty in mastering such a broad range of information is a factor that makes staff retention quite difficult. And this is a challenge common across the industry.

Speaker #1: And I think it's finishing off quite nicely. And with regards to the situation, as Mr. Sasaki said, we naturally believe that this will continue in the second half as well.

Speaker #1: To address this, we introduced an AI agent starting in July that answers inquiries from store staff deployed across approximately 2,000 AU shops nationwide. So for example, for inquiries that are hard to judge just by flipping through a manual, such as, "I want to change the family name on account and replace the phone on the same day." This is a very complex scenario.

Speaker #1: And we will leverage increasing value to make it more positive. However, regarding business and personal, how much can we grow when we combine the two?

Speaker #1: It's difficult to say specifically, but in principle, business performance will achieve the current projections that we have disclosed. So, the plan is to expect a certain level of growth with some level of cost, and make sure that we will be able to achieve the basic target.

Speaker #1: And by using this AI, we will be able to cut response time quite significantly for these complex inquiries as you can see from this graph.

Speaker #1: The response time has been cut by 80, 90 percent. And since implementing from July, we used to have around 200,000 monthly inquiries prior to July, but this has been cut to half.

Speaker #1: So, putting aside the numbers on page 15, what sort of initiatives do you plan to engage in in the second half? Thank you. So, let me talk about the specific initiatives.

Speaker #1: So we have worked together with startups to build this and this is no longer at the trial level or pilot level, but this is implemented at all stores so that we will be able to reduce the burden of the frontline staff at the carriers.

Speaker #1: So in terms of personnel, as Mr. Sasaki said—well, let me ask Mr. Sasaki to speak about that. So, in terms of personal growth, we are slightly behind the plan.

Speaker #1: But we are progressing nearly in line with the plan. And in terms of the good performance right now, this is being driven by the device businesses, with device guarantee, warranty, and Ponta Pass, as well as the lost-in business.

Speaker #1: We want to further showcase the professional customer service skills and warm interactions that our staff bring to the table by using this technology. Next is on the AI-enhanced lifestyle.

Speaker #1: These are the drivers. In terms of the device business, because of the foreign exchange impact, component costs are increasing as well. So there's a lot of need for repairs and needs for—and therefore, I think we are helping a plan in order to improve, and so this is a great opportunity for contact past lesson.

Speaker #1: So last month, we released Buff Me, a service that uses AI to support individual growth. Buff Me is a conversational AI service that draws on approximately 150 content sources including books, magazines, and web media to search for needed information organized key points and provide concrete suggestions for learning and hobbies.

Speaker #1: The concept the AI that helps you grow. So you are able to learn new knowledge through dialogue with AI and evolve on yourself. That's the concept.

Speaker #1: We had the conventional Ponta past light. We are trying to migrate the members to Ponta Pass. We're in the process of that procedure. With that, we will be able to build the customer base more, and we will be able to collaborate more with Lawson to promote Ponta Pass. Therefore, we will be able to see some upside on this as well.

Speaker #1: And as we see, the contents generated increasing we want to be able to provide information that can be drawn on trusted content sources. So there's no concern for hallucinations.

Speaker #1: And with regards to financial business, at this point in time, there is a decrease in profit, but this is already included in the plan. It's expected.

Speaker #1: And we will also protect the rights of our content provider partners at the same time. So this is a peace of mind for both the user side and the provider side.

Speaker #1: Therefore, we will control deposit and loan balance as well. But in terms of the payment, centering on credit, we're seeing nice progress in the growth of this business.

Speaker #1: We believe that this is something that we would like to grow going forward. And finally, on our initiatives for social implementation, strengthening the local touch points.

Speaker #1: We have a paid-to-bank strategy. We will have customers holding open set up for a credit card, open a bank account, and then we will be able to increase sticky bank accounts.

Speaker #1: And to the left, you will see our local touch points Happy Lawson Town which uses Lawson Stores as a hub to build communities. The first location opened in Ikeda City in Osaka Prefecture in June and the second location opened Hino City in Tokyo in August.

Speaker #1: And the key here is the Gold Card. With regards to the Gold Card, in May we were able to achieve 2 million contracts, and UQ has the Komikomi Value Otoku Discount Plan, which we started last month.

Speaker #1: In 2030, we aim to expand this to 100 locations across all 47 prefectures nationwide. By combining the real world with technology, we will contribute to solving local community challenges.

Speaker #1: And to the right, you will see the concept of the digital belt as an slide about technological development of the all-photonic network. We want in order to connect data centers nationwide with low latency and low power consumption, all-photonic network will be extremely important.

Speaker #1: If they can actually continue to sign up with the Gold Card one year later, they will be able to continue with the current tariff plan.

Speaker #1: And so this is a campaign that we're implementing as a result of this effect. So we will grow gold card issuance, and we will be able to realize growth in the financial business, including Jibun Bank as well.

Speaker #1: Up until now, the optical thickness could only be set to a single destination point to point. This time, we succeeded in transmitting using technology that sends signals to multiple destinations at once, making it the world's first such success in a commercial environment.

Speaker #1: So we are in line with our plan. Very steady. So with regards to the business growth, Hosoi will answer that question. Thank you very much for the question.

Speaker #1: With regards to business, in terms of the second half, we have AI integration, cloud, security, and BPO. These are the things that we can expect.

Speaker #1: The overall framework will contribute to ITU International Standardization as well and with this, we will be able to support the Society to Build Around AI.

Speaker #1: With regards to AI integration, from April we have new KDDI iRET, and we are able to capture very aggressive demand. We have tripled the number of new projects quite well by the customers.

Speaker #1: Next, I will explain on capital allocation regarding quality improvement which is a key theme of our midterm plan. Core free cash flow which funds our growth investments is growing steadily.

Speaker #1: So we will leverage that to make sure that we will be able to proceed with these different projects on AI. And there's a strong demand for cloud as well.

Speaker #1: Up 10.9 billion yen year on year over the past 12 months with margins also holding stable. Operating cash flow margins stands at 21.6% reflecting a strong fundamental base for growth investment.

Speaker #1: Conventionally, it was primarily centered on AWS, but now we're expanding to Google, Oracle, and most recently to Microsoft. There's been an acceleration in the expansion of cloud infrastructure.

Speaker #1: In addition to this expanding capital base, we are also strengthening our review of the structure to broaden our pipeline of growth investments. We are also making progress on disciplined business portfolio review on the right-hand side.

Speaker #1: With regards to security, what's been talked about in the world is POS, so we are ready as well. So, in the second half, we have a new assessment and evaluation system for the supply chain, so we will use this as an opportunity to offer new services to position ourselves well.

Speaker #1: So far, this fiscal year, we have decided on 11 divestments which will generate approximately 150 billion yen in cash. We will continue to verify investment efficiency and strategic rationale as we proceed with business portfolio review.

Speaker #1: To help you gain a deeper understanding of the initiatives I have described today, we will hold KDI Summit 2026. The KDI Group's largest business event on October 27, 2028.

Speaker #1: With regards to BPO, we bottomed out last fiscal year and are now turning around to quite positive. It was a very challenging time, but we worked very hard.

Speaker #1: The venue is the Takanava Gateway Convention Center. In Takanava, a, Tokyo. With simultaneous online streaming. We will introduce the digital belt concept that supports an AI-driven society along with the AI latest social implementation examples of AI-enhanced lifestyle and AI-powered label details and the registration start date will be announced separately.

Speaker #1: And now we are seeing a better upward trend. So going forward, as we see increased demand, especially in the BPO market, we will make sure that we capture that demand.

Speaker #1: And that will be our theme for the second half. Thank you very much. The second question: on page seven, as you had explained in the second half, you are planning to spend strategic costs for growth.

Speaker #1: Finally, here is today's summary. As shown here, this reflects everything I have explained today. We will continue to drive our initiatives forward to. Achieve a full year forecast.

Speaker #1: And I think that's necessary for next year and two years down the road. So, with regards to AI, you do need to make a certain level of investments; otherwise, there will be no return.

Speaker #1: Thank you for your support and thank you very much for your attention. We will now begin KDDI Corporation's March 2027 first quarter earnings briefing and Q&A session.

Speaker #1: So, regarding strategic cost investment: how much, at what scale, and in which areas are you planning to spend? Would you be able to explain and give more color on this?

Speaker #1: Thank you very much for taking the time to join and view our briefing today. My name is Miyakawa from the IR department and I will be serving as today's moderator.

Speaker #1: Thank you very much. So this is a strategic investment in the mid to long term. Would that answer your question? Yes. Please. Then Mr. Aki will answer this question for you.

Speaker #1: This briefing is live streamed with simultaneous English, Japanese translation. Today's contents will also be available on demand at a later date on our IR website.

Speaker #1: Thank you very much for your question. So, with regards to AI investment, I need to break it down into two. So, first is organic.

Speaker #1: Now, let me introduce today's attendees. CFO, Executive Director of Corporate Sector, Sai Shoji. CSO and CDO and Executive Director of Corporate Strategy Division, Katsuki.

Speaker #1: Capex—so, AI integration, IRET, these are things that will be included as part of AI implementation. Capex and also the cybersecurity area as well—those costs will basically be capped within the Capex to sales at 12%, within that range.

Speaker #1: Executive Director of Business Solutions Core Sector, Hosoi. Executive Director of Personnel Core Business Sector, Sasaki. General Manager of Corporate Management Division, Akita. Today, we have posted five documents on our IR website: three earnings related materials and two TSC disclosure documents.

Speaker #1: Meanwhile, as part of our midterm strategy, we're planning to invest ¥1 trillion for growth over three years, so we have that framework in place. We talked about core free cash flow earlier, and we are now seeing a solid track record. We're also doing well with investments as well.

Speaker #1: Regarding the content of the materials as well as the performance and subsection targets that will be discussed in today's Q&A, please refer to the disclaimers in each document.

Speaker #1: So the cash in there will be spent for AI investment, and we'd like to do so more proactively as well. The contents of that are being discussed among the management.

Speaker #1: First, Sai Shoji will explain the FY 2027 March first quarter earnings summary followed by Q&A. So Executive Vice President Sai Shoji, please go ahead.

Speaker #1: So, with regards to AI growth investment, you have physical AI and other different types of cloud business investment into applications. These are all included with regards to this.

Speaker #2: Thank you for taking time. Out of your busy schedules today to join us for our FY 27 March Q1 earnings presentation. I will focus on the key points for investors and analysts in my presentation.

Speaker #2: Quarter one saw growth in both revenue and profit marking a strong start to the fiscal year, relative to our full year forecast. On the left, operating revenue was up 5.1% year on year and the progress rate against the full year forecast was 23.2%.

Speaker #1: As you can see from the capitalization based on return, we want to be very disciplined in our investment and invest in high-credibility projects.

Speaker #2: In the middle, adjusted operating income was up with a progress of 26%. It was up 21%. On the right, adjusted net income was up 21.6%, progress rate 26.5% respectively.

Speaker #1: We will keep ROIC in mind to determine the growth areas for investment. In particular—and I'm getting long here—but in terms of AIDC in Sakai, there are many clients, corporates that have already adopted this.

Speaker #2: Next, here are the operating revenue figures for each segment. For the first time, we are disclosing revenue for the new segments and subsegments for the first time, reflecting our confidence and determination to steadily expand each area as you can see operating revenue increased across all segments.

Speaker #1: There are companies that do self-driving, and there are different use cases there. So, we would like to select investment opportunities with these things in view as well.

Speaker #1: Hope that answers your question. Thank you. So, in terms of the ¥150 billion in divestment, you will see gains in investment as well, right?

Speaker #2: And our core businesses, including mobile communications revenue, are growing steadily. This shows the factors affecting the change in adjusted operating income in Q1. Mobile communication revenue drove the increase in profit.

Speaker #1: So, you would probably be able to absorb some of the investment cost, but you're not really depending on that much. Is that the case?

Speaker #1: So in terms of the sales gain, of course, that will be something that could be used for investment as well. Thank you very much.

Speaker #2: Growth areas also made steady progress toward double-digit growth for the full year. For the full year, as shown on the right, we are firmly aiming for our initial forecast of 1 trillion 200 10 billion yen.

Speaker #1: Thank you very much. Let's go on to the next question. Is SBI Securities' host present? Please unmute and start your questions. Thank you. From SBI Securities, my name is Hosui.

Speaker #2: Key KPIs are improving thanks to our lifetime value LTV focus initiatives from the left. The number of active smartphones in Q1 was 33.3 million and increase of 390,000 year on year.

Speaker #1: I have two questions regarding divestments. You explained that there will be progress made in investments going forward. In terms of the review of the portfolio, how much of that is complete?

Speaker #2: Additionally, the churn rate was 1.17%, a significant improvement of 0.06 percentage points year on year. On the right, mobile RPU in Q1 was 4,400 yen, year on year increase of plus 160 yen, a substantial 3.8% growth.

Speaker #1: What percentage of completion? You may not be able to share specific numbers, but in which areas are you considering divestment? How many transactions, and in terms of capital allocation—although there may be overlap with earlier questions—if more cash is generated from divestments, could surplus be returned to shareholders, or will it continue to be reserved as your funding source for investment?

Speaker #2: The number of subscribers on top tier plans across all brands is expanding steadily, laying the foundation for profit growth in the second half of the fiscal year.

Speaker #2: Next, here's an overview of our growth areas for FY 27 March. On the left, personal growth. First quarter operating income for personal growth grew 9.3% year on year with all five subsegments performing well.

Speaker #1: These are my questions. Thank you for your questions. I would like to turn to Katsuki-san again for answers. Thank you for your questions. Earlier, toward the end of the presentation, that was made.

Speaker #1: As mentioned there, in Q1, the decisions made—in total, there were 11 such projects or transactions we determined, excluding seven that are the release of policy holdings.

Speaker #2: On the right, which is business growth, operating income grew 21.6% year on year with all five subsegments reporting increases in both revenue and profit.

Speaker #2: Following this, I will explain the key points for each business segment. financial business, AU Financial Holdings operating income for Q1 was down 3.7 billion yen year on year but this was in line with our expectations.

Speaker #1: The four that remain, we have stated. The specifics of the four divestments—at this moment, we cannot necessarily say what the percentage of completion is. We would like to continue to increase investment efficiency and consider the rationale behind investments as we determine them going forward.

Speaker #2: In addition to the challenge of increasing deposits, a key issue for a bank, we had factored in the impact of mark to market losses due to rising interest rates into our forecasts at the start of the fiscal year, excluding these factors are core credit card and banking businesses are growing steadily and we are moving forward with measures to further strengthen them.

Speaker #1: We will be able to see how much of the review is completed, and we already have this and the time schedule as well. So, under what's been determined, we would like to continue to steadily proceed with these divestment projects.

Speaker #2: Next, I will discuss our devices business and low some point to pass. On the left, revenue from device related services and point of pass is growing and active user rates are also improving.

Speaker #1: I hope I answered your question. Well, thank you. So, if your divestments are made at prices that are higher than you expected, would you return the surplus as shareholder returns, or will you continue to use it for your growth investment?

Speaker #2: On the right, we are making progress in creating value in partnership with Lawson. Next is AI integration. Combined, AI integration and cybersecurity Q1 revenue grew at solid 9.19.2% year on year.

Speaker #1: For that question as well, in our presentation of our midterm management plan, we already explained, but we would like to generate core free cash flow through divestments.

Speaker #2: A secure cloud environment is a prerequisite for AI implementation and we leverage the group's strength to accelerate implementation support. At present, we are focusing on expanding our cloud infrastructure with Q1 revenue growing by more than 30% year on year.

Speaker #1: We would like to increase our capacity for future investments by generating cash from that perspective, as Masino-san said. So, for growth investment in AI and other areas, we will look at that, and while doing so, based on return, we will make capital allocations.

Speaker #2: Connectivity data center is capturing AI inference needs with Q1 operating revenue growing a solid 20.6% year on year. EBITDA also grew similarly year on year.

Speaker #1: And, of course, as part of that, some funding will be allocated to M&A and other growth investments. And so, within the line, there could be cases where there may be no potential investment. We should consider that case — we will consider returning the fund in that moment.

Speaker #2: With the EBITDA margin exceeding 40%. We will continue to capture growth opportunities accompanying the spread of AI. Next, in relations to inappropriate transaction, on the progress of our group governance strengthening and recurrence prevention measures.

Speaker #1: We're not able to make that decision. We would like to steadily continue to solidify and increase the pipeline for growth investments. Thank you. Well, for the second question, I'm sure it's difficult to make specific comments, but in May you indicated your intention for the sale of Kakam.com.

Speaker #2: At the top, by June of this year, we completed comprehensive inspections of the 110 target companies and have been developing new rules and structures.

Speaker #2: We are now operating and monitoring the new rules under the new structure. In the middle, to build relationships of mutual trust, the top management visited major strategic subsidiaries and held dialogue sessions with the top executives of group companies.

Speaker #1: There's been counterproposals as you proceed with divestments from the minimizing shareholder return. Would you try to maximize the sales price or strategically or in terms of the possibility of the consider a more comprehensively?

Speaker #1: So that's my second question. Thank you again for the second question. Katsuki-san will answer your question. Thank you. Thank you for your question regarding Kakaku.com.

Speaker #2: At the bottom, in terms of AI and system utilization, we have introduced an AI system for credit screening and an anomaly detection tool using financial data.

Speaker #1: TOB offers are being made from both sides. An inclusive comms special committee very careful discussions are ongoing. Kakaku comms existing shareholders voice and KDDI shareholders for them as well.

Speaker #2: Going forward, we will begin using these under the new rules and continue development toward comprehensive use of AI in systems. Regarding the recent unauthorized access incident affecting the email system provided to ISB operators, we take the administrative guidance seriously and will do our utmost to prevent recurrence and we will work to improve and raise awareness of security standards across the industry.

Speaker #2: In light of the issues brought to light, to strengthen security, we are using frontier AI to conduct vulnerability diagnostics among other measures. I will also report on progress in improving management quality which is one of the important things of this midterm period.

Speaker #1: The benefit and the interest of such shareholders must be considered first and foremost as we proceed with this transaction. That's how we should treat this.

Speaker #1: So it's not the special unique circumstances of ours that would determine this. We would like to make decisions based on economic rationale—on the economics of this.

Speaker #2: On the left, core free cash flow, the source of funding for growth investments, and its margin have remained stable. The operating cash flow margin also stands at 21.6% for the strengthening the fundamentals for growth investment.

Speaker #1: That would be the case. Thank you very much for your answers. That's all for my questions. Thank you. Next question is from Mr. Kikuchi.

Speaker #2: In addition, we are strengthening our review structure for growth investments and expanding our pipeline. On the right, so far this fiscal year we have decided on 11 divestments which is generating approximately 150 billion yen in cash.

Speaker #1: Nikko Securities. Please unmute. My name is Kikuchi. Hello, thank you. On page seven, related to Masino-san's question—and I'm a bit persistent about this—but in Q1, you had a memo provision and you're revising it.

Speaker #2: We will continue to review investment efficiency and strategic rationale and proceed with the review of our business portfolio. today's summary is presented here as shown.

Speaker #1: You know, if you had incorporated it, you could have done this in the previous year. So maybe there has been some upside to this.

Speaker #1: And also, if you look at the details in terms of financial businesses, I think there may be a downward factor because of the higher interest rate, but because there wasn’t that much upside, I think maybe that was the reason.

Speaker #2: In addition, as an opportunity to further deepen your understanding of our strategy and businesses, we are also considering holding an IR day in mid-September.

Speaker #2: We will provide the details once they are finalized. We will continue to drive our initiatives forward to achieve our full year forecast. Thank you very much for your attention.

Speaker #1: And also, it's the same thing with the device prices as well. So you have upside. So, if you know operating profit, it seems as though you don't want to make an upward revision.

Speaker #1: Ms. Sashoshi, thank you very much for the presentation. At this moment, we would like to take questions from the audience. Those of you with questions, please use the hand raise icon of Zoom or the hand raise button within a reaction.

Speaker #1: And that's the reason why you're making a strategic cost for the second half—because you know if there's an upside. Can I expect there to be an upside, or would that be different?

Speaker #1: And in terms of divestment, in Q1, where is it included? That's my first question, thank you. So, with regard to the revision in memoir, this refers to the revision of the provision rate for memoir's lease receivables.

Speaker #1: If you're cold, please announce your affiliation and name and tap the mute release to ask questions in order to take as many questions as possible.

Speaker #1: We would like to limit the number of questions to two per person at a time. If you have two questions, please ask questions one at a time.

Speaker #1: We implement this every year the track record and in this time in calculating the future default risk among which we have made a provision for before we deem that some of the cost will not be occurring so because of the dollar has on an overall has declined and therefore we felt that default rate or loss risk had deteriorated.

Speaker #1: And we may not be able to take questions if you're not stating your affiliation or name. We will take questions until the scheduled time.

Speaker #1: Tokunaga-san from Daiwa wa Securities, please unmute and start your questions. Can you hear me, Tokunaga from Daiwa Securities? I have two questions. Question number one, it's about Rakuten roaming.

Speaker #1: I think it's because of the press conference, but each media is saying that roaming service will end at the end of September. However, for some rural areas, the service will continue while some media also report that it's still under negotiation.

Speaker #1: Therefore, we have reversed the provisions, and that is why we see revisions in the lease receivable provision rate. In terms of the impact, this is something that we were able to foresee from the planning.

Speaker #1: So, we have already included this in our initial guidance. Now, in tracking the record of this provision going forward, we will make sure to revise it accordingly in the future.

Speaker #1: So what are the facts if you could summarize them? If a decision is almost made, what would be the impact on your revenue? Would it bring down your revenue?

Speaker #1: And talking about rural areas, well, to what extent are you providing your roaming service outside of rural areas? So if you could please share these facts.

Speaker #1: So, in terms of the overall business performance in Q1, whether there's an upside against the internal plan—yes, it performed better than our internal plan.

Speaker #1: That's my first question.

Speaker #2: Thank you for your question. So our contract on Rakuten roaming what will happen to that? And as changes are made, what would be the impact on our revenue and our financial performance?

Speaker #1: So we want to maintain this upside—you know, outperformance of the plan—but I have been saying from before, we have future costs, or costs and the investment for the future as well.

Speaker #2: I understood the questions to be those. Now, first, regarding our contract with Rakuten, what we're saying is that we have already played a certain role for Rakuten already.

Speaker #1: So, we have not made any revisions to the outlook. That is all. Does that answer your question? Yes. Thank you. So, the second question.

Speaker #1: So I think you are performing well overall. So, I want to do a little bit of a deep dive into your business area.

Speaker #2: That's our understanding. To Rakuten Mobile, in order to supplement population coverage for seven years, we have been providing roaming services Rakuten's service coverage is expanding based on that.

Speaker #1: So, in the increase of profit for business growth, what is the factor for that? The increase in profit on the latest page is in operating, because the data center has—it doesn’t clearly say that there’s a growth in operating income.

Speaker #2: We believe that we have already played a major role for them. So for the current agreement, at the end of September, it will be terminated.

Speaker #2: So why are we doing this? We have our own customers at KDDI. We want to maintain the quality for our own customers. AU, Yuki Mobile, and Povo are users telecom quality must be protected firmly.

Speaker #1: So, because there's a lot of speculation that there's not much operating income, then where does the profit come from? That's what I'd like to know.

Speaker #1: Thank you. Thank you for that question. So you will answer the question. Thank you for the question. Thank you. In terms of profit for this fiscal year, the way we actually book depreciation and amortization has changed. The standard has changed, so that is why profitability has changed slightly. We will continue to follow the same standard going forward.

Speaker #2: So depending on the situation, we would like to take a firm attitude in order to protect the quality. So the current agreement with Rakuten will be brought to a close.

Speaker #2: But the way in which compete and collaborate will continue to be considered. And limiting to some of the rural areas for a certain period, we will cooperate with Rakuten so that they can maintain their infrastructure.

Speaker #2: That was what was agreed upon with them. For the limited rural areas, within a certain timeline, Rakuten will be building their own infrastructure. That is what we have negotiated with Rakuten.

Speaker #1: There are increases in data centers, both increasing floor space and adding new builds. So there's consistently new data centers. I think we will continue to see cash outs, so we do not believe that this will change significantly.

Speaker #2: That is where we are currently. What will happen to roaming revenue then? The impact on Q1, you only year will be about 800 million.

Speaker #1: That is our view. So let me supplement from IR. With regard to the data center, in the disclosure data book, we do have information on adjusted operating income in terms of the track record for Q1.

Speaker #2: And in terms of our four-year guidance, conservatively, we have not factored in the agreement after September. So we're not factoring in that service in our performance September and onward to be conservative.

Speaker #1: It was 6.9 million. Year on year, this is a 700 million increase. So, please refer to that as well. Thank you very much. If that's the case, the area where there's an increase in profit is—you have explained different parts of the business where there's been an increase in profit, and that's where it is, right?

Speaker #2: But as was mentioned, for some rural areas, we will continue to provide roaming service for Rakuten. So in the second half, there will be some revenue generated from that.

Speaker #2: However, I'm sorry, but I will have to refrain from giving you a specific number regarding that. That would be all. Thank you. Just one point of follow-up.

Speaker #1: So it comes from different areas, and that momentum will continue. Is that the case? Yes, that's the right understanding. Thank you very much. That is all from me.

Speaker #2: So in order to protect the traffic of your own users, you said. So after September end, how much quality improvement can be expected for users' traffic?

Speaker #1: Hi. Thank you very much. The time is fast approaching. We would like to have the last step person ask a question. Please unmute and state your question.

Speaker #2: And may I expect that quality will increase also in urban areas?

Speaker #1: Page seven. Telecom core increase in profit outside of mobile communication revenue: ¥14.7 billion—or rather, ¥16.4 billion. And a major item in this is the increase in revenue from devices. While my understanding is not correct?

Speaker #1: Yes. Naturally, we're going to prioritize our own users and quality will be improved. And quantitatively, how much improvement it's hard to say. So I shall refrain from making quantitative comments at this moment.

Speaker #1: Thank you. My second question is as follows. It's about your peers in the industry. So your price revisions went very well. And for this particular quarter, it contributed to increase our increase the revenue and profit as well as reduction in churning rate soft bank has decided for price revisions and Docomo are also continuing to consider price increase.

Speaker #1: Thank you for the question. I would like to turn to Sasaki-san for the answer. Thank you for your question. So, outside of communication, revenue, and profit, what has contributed to profit?

Speaker #1: The large one is promotional expense. Suppression or reduction in promotional expenses is a large factor behind this. Since last year, consistently we have said that we're focusing on lifetime value, LTV. We try to acquire new customers.

Speaker #1: So you have changed your prices once. But once that round is over, are you considering second round of price hike? To what extent are you considering about that?

Speaker #1: So, for customers who have contracts over a short term, we are reducing expenses for them, so that we can allocate more expenses and costs to customers who are on a longer contract.

Speaker #1: The field that I have is that compared to your peers, you have relatively cheaper plans. So there may be a potential room for price hike further.

Speaker #1: What is your thought? Thank you for your question.

Speaker #1: And by so doing, we are controlling promotional expenses, and that has increased efficiencies, which is having an impact. And at the end of last year, we reviewed accounting standards for the historical cost for short-term contracts that's been amortized, and therefore that also contributed to a reduction overall in promotional expenses from those sources. And that accounts for a large part of increasing profit from the communications business.

Speaker #2: So price hikes, price increases, would there be a second round of price hike? Was your question.

Speaker #1: Regarding that, I would like to turn to Asasaki-san for an answer whose responsible. Thank you very much for the question.

Speaker #2: Last year, we led a price change we increased our prices. It's been accepted by our customers. And our peers in this industry are making the same move.

Speaker #2: They're changing their plans to appeal quality over quantity. And AU's price has changed. That was back in August. It's almost a year since. And what's going to be our next set of measures?

Speaker #1: So how much would that be, in terms of the impact contributing to profit, communication revenue, year on year? If that's the case, do you think this will continue into Q2, the second half?

Speaker #2: In the plans, we introduced AU value a link plan. We also had a campaign, Komi Komi Value. The prices for these plans are penetrating quite well.

Speaker #2: There's been good progress made with that. It's not just the impact from price revisions, but with improvement in plan makeup, communication revenue is up.

Speaker #1: I think that is understood, and it is correct because our policy remains the same. Okay. So, reduction in profit in financial business—you talked about valuation losses.

Speaker #2: So by increasing the penetration of these plans, we would like to continuously raise revenue from communications so that is what we will continue to do.

Speaker #2: And for the next round of price hike, there's nothing that we have decided at this moment. However, from our perspective, we would like to focus on value.

Speaker #1: What would be the amount of that? And secondly, housing loans and credit card loans—they are growing steadily. Credit card, and yet you're talking about reduction in profit.

Speaker #2: How can we translate a value into the price that customers pay? We would like to continue to be the trend setter. We are always considering that aspect.

Speaker #1: I wonder why. And will this continue for some time to come? Will this be prolonged? So that's the financial business. Thank you very much.

Speaker #2: And so by looking for opportunity by taking action if necessary, if we can change the price again, we would like to return part of that to our partners.

Speaker #1: I will answer your question. Thank you for your question. First, mark the market losses—valuation losses. This has to do with the increase in long-term interest rates.

Speaker #2: And that cycle shall continue. So there's nothing decided specifically with respect to the next round of price hike. Thank you very much. May I ask a follow-up question?

Speaker #1: Because that happened. fixed rate housing loan asset with increasing long-term rates. for the, increase in the rate, in terms of calculation, roughly 2.4 billion yen of market to market losses were posted and that's factored in in the initial plan.

Speaker #1: So in this particular quarter, organically, mobile communication how much is it increasing? And I'm sure you're considering second round of price hike. As you do so, what are the terms and conditions that you are most focusing on if you can disclose them?

Speaker #1: Just to share a thought on that as well.

Speaker #2: Well, thank you for your question.

Speaker #1: Telecom revenue, this quarter has gone up. And of course, large part of that is because of the price hike. But value link plan penetrating more and Komi Komi plan is also making good inroads from UQ to AU sell up or migration.

Speaker #1: And this is something that we have said before. Our loan-to-deposit ratio is over 100%, so there's a very robust stat for housing loans. We have been providing loans quite actively, and therefore loan assets have increased.

Speaker #1: Compared to last year, it's been up substantially. So such effects are also included I cannot give you specific breakdown of such effects. But they're making progress above what we initially expected in our plan.

Speaker #1: We're applying a BS control, or in order to control liquidity more, this term we have suppressed providing housing loans. So, as a result, there was a negative impact from mark-to-market losses as a result.

Speaker #1: So what about the conditions for the second round of price hike? I'm sure there are a lot.

Speaker #1: However, this is compensated for by robust revenue from the bank business and credit card issues. Therefore, while in Q1 we had minus ¥3.7 billion, we would like to continue with liquidity control and restore liquidity so that we can further grow next year and onward.

Speaker #2: Well, going forward, while prices will be considered, in the financial business area, which we are competing harshly with our peers and quality of telecommunication services, we would like to continue to create value centering on those aspects.

Speaker #2: We will continue such efforts. Thank you very much.

Speaker #1: Well understood.

Speaker #2: Mr. Tokinaga, thank you. So next question is from Mr. Masano from Nomura Securities. Please unmute. Masano from Nomura Securities, I have two questions. So first question, as you have discussed, you are now shifting gears to value-added management.

Speaker #1: So we're in a transition period doing so, if you could understand. So thank you. So, seeing from the outside, balances are increasing steadily, but you are trying to change the makeup and the revenue from housing loan commissions.

Speaker #2: So as a result, in the first half, in terms of prices and in terms of plan mix, I think you are able to become sufficiently profitable.

Speaker #1: They are down. Therefore, negative. Is that correct? Yes. And do you think you will be able to eliminate this problem by the end of this fiscal year?

Speaker #1: So, what will be the timeline for balance sheet control, and by when will you be able to resolve this so that you can—well, we would like to continue to work on this problem this year so that we can grow next year.

Speaker #2: So you will make a progress in the second half. So as you say, you need to accelerate the growth area. And as you say in page 15, you have business and growth personal you have the four AI integration and connectivity data center financial business Lawson, how much can you accelerate these businesses in the second half?

Speaker #1: So the balance of deposits, which is the source of funding for housing loans, means we will have to gather deposits. As was presented earlier, the balance of deposits has increased 1.3 times year-on-year.

Speaker #2: So you have the first half good results and you have the basis improvings become a cash card. So what is your interest in terms of the acceleration of the growth?

Speaker #1: I'm talking about retail deposits, and so I believe that we can expect quite a good recovery and growth again. And, regarding loan balance, housing loans have low margins, but not only that, we also have consumer finance and card loans where margins are higher.

Speaker #1: Thank you very much for the question. So in terms of the first half, let me speak about the first quarter. In terms of performance, it is trending extremely well.

Speaker #1: So, per loan, the ticket size is smaller, but margins are higher, and by moving more toward such products, we would like to make sure to improve the margin.

Speaker #1: And I think it's finishing off quite nicely.

Speaker #2: And with regards to the situation, as Mr. Sasaki said, we naturally believe that this will continue in the second half as well. And we will leverage improving value, increasing value to make it more positive.

Speaker #1: And create a favorable cycle funding for the bank. And so that is something that we would like to work on this year so that we can grow again, start growing again next fiscal year and onward.

Speaker #1: Thank you for your answers. Thank you. Now that time is up, we would like to conclude the earnings briefing for Q1 of the fiscal year ending March 2027.

Speaker #2: However, business and personal how much can we grow when we combine the two? It's difficult to say specifically, but in principle, the business performance will achieve the current projection that we have disclosed.

Speaker #2: So the plan is to expect a certain level of growth with some level of cost and make sure that we will be able to achieve the basic targets.

Speaker #2: So putting aside the numbers, on page 15, what sort of initiatives do you plan to engage in in the second half?

Speaker #1: Thank you. So let me talk about the specific initiatives. So in terms of personal, as Mr. Sasaki said, well, let me ask Mr. Sasaki to speak about that.

Speaker #2: So in terms of personal growth, we are slightly behind the plan. But we are progressing nearly in line with the plan. And in terms of the good performance right now, this is because driven by device businesses.

Speaker #2: With device guarantee, warranty, and Ponta pass and Lawson business, these are the drivers. In terms of the device business, because of the foreign exchange impact and the material component cost is increasing as well, so there's a lot of needs for repair of the devices and needs for warranty.

Speaker #2: And therefore, I think we are now developing a plan in order to improve and so this is a great opportunity for us. In terms of Ponta pass Lawson, we had the conventional Ponta pass light.

Speaker #2: We are trying to migrate the members to Ponta pass. We're in the process of that procedure. With that, we will be able to build the customer base for the more.

Speaker #2: And we will be able to collaborate more with Lawson to promote Ponta pass. And therefore, we will be able to see some upside on this as well.

Speaker #2: And with regards to financial business, this is at this point in time decrease in profit. But this is already included in the plan. It's expected.

Speaker #2: Therefore, we will control deposit and loan balance as well. But in terms of the payment, centering on credit, we're seeing a nice progress in the growth of this business.

Speaker #2: We have pay to bank strategy. We will have the customers holding open sign up for a credit card open bank account, and then we will be able to increase sticky bank accounts.

Speaker #2: And the key here is the gold card. With regards to the gold card, in May, we have been able to achieve 2 million contracts and UQ has KomiKomi value Otoku discount plan, which we started last month.

Speaker #2: If they can actually continue to sign up with gold card, we have one year later, they will be able to continue with the current tariff plan.

Speaker #2: And so this is a campaign that we're implementing. And as a result of this effect, we have seen a higher issuance. So we will grow gold card issuance and we will be able to realize growth in the financial business, including Jibun Bank as well.

Speaker #2: So we are in line with our plan, very steady. So with regards to the business growth, Hosoi will answer that question. So thank you very much for the question.

Speaker #2: With regards to business, in terms of the second half, we have AI integration, cloud, security, BPO, these are the things that we can expect.

Speaker #2: With regards to AI integration, from April, we have new KDDI IRET, and we are able to capture very aggressive demand. And we have threefold in terms of the new projects.

Speaker #2: So received quite well by the customers. So we will leverage that to make sure that we will be able to proceed with this different projects on AI.

Speaker #2: And there's a strong demand for cloud as well. Conventionally, it was primarily centered on the AWS, but now we're expanding to Google Oracle and most recently to Microsoft.

Speaker #2: So we will see acceleration in expansion of cloud infrastructure. With regards to security, what's been talked about in the world is POS, so we are ready as well.

Speaker #2: So in the second half, we have a new assessment evaluation system for supply chain so we will use this as an opportunity to offer new services to position ourselves well.

Speaker #2: With regards to BPO, we have bottomed out last fiscal year, and we're now turning around to quite positive. It was a very challenging time, but we worked very hard.

Speaker #2: And now we are now seeing better trends upward trend. So going forward, as we see increased demand, especially in BPO market, we will make sure that we capture that demand.

Speaker #2: And that will be our theme for the second half. Thank you very much. The second question. On page seven, as you had explained in the second half, you are planning to spend strategic costs for growth.

Speaker #2: And I think that's necessary for next year and two years down the road. So with regards to AI, you do need to make a certain level of investment.

Speaker #2: Otherwise, there will be no return. So strategic cost investment, how much and what's the scale? In what areas are you planning to spend? Would you be able to explain give more color on this?

Speaker #2: Thank you very much. So this is strategic investment in mid to long term. Would that answer your question? Yes. Please. Then Katsuki will answer this question for you.

Speaker #2: Thank you very much for your question. So with regards to AI investment, I need to break it down into two. So first is organic.

Speaker #2: Capex. So AI integration, IRET, these are things that will be AI implementation in the conventional capex and also cybersecurity area as well, like POS.

Speaker #2: This will be basically within the capex to sales 12% within that range. Meanwhile, in a strategy, we're planning to invest 1 trillion yen for growth in three years.

Speaker #2: So we have that framework in place. And we talked about core free cash flow earlier. But we are now seeing solid track record, and we're also doing well with divestment as well.

Speaker #2: So the cash that's generated from there will be spent for AI investment. And we'd like to do so more proactively as well. So the contents of that is being discussed among the management.

Speaker #2: So with regards to AI growth investment, you have physical AI and other different types of cloud businesses. Investment into applications. These are all included with regards to this.

Speaker #2: As you can see from capital allocation based on return. We want to be very disciplined in our investment. And invest in high credibility projects.

Speaker #2: We will keep ROIC in mind to determine the growth areas for investment. In particular, and I'm getting long, but in terms of AIDC in Sakai, there are many clients, corporates that have already adopted this.

Speaker #2: And there are companies that do self-driving, there are different use cases there. So we would like to select investment opportunities with these things in view as well.

Speaker #2: Hope that answers your question. Thank you. So in terms of the 150 billion in divestment, you will see gains in investment as well, right?

Speaker #2: So you would probably be able to absorb some of the investment cost, but you're not really depending on that much. Is that the case?

Speaker #2: So in terms of the sales gain, of course, that will be something that will be could use for investment as well. Thank you very much.

Speaker #1: Massimo-san, thank you very much. Let's go on to the next question. Is BI securities? Hosei-san, please unmute and start your questions. Thank you. From SBI Securities, my name is Hosei.

Speaker #1: I have two questions regarding divestments. You explained that there will be progress made in divestments going forward. In terms of the review of the portfolio, how much of that is complete?

Speaker #1: What percentage of completion? You may not be able to share specific numbers, but in which areas are you considering divestments? How many transactions? And in terms of capital allocation, although there may be overlap with earlier questions, but if more cash is generated from divestments, could surplus be returned to shareholders?

Speaker #1: Or will it continue to be reserved as your funding source for investment? These are my questions. Thank you for your questions. I would like to turn to Katsuki-san again for answers.

Speaker #1: Thank you for your questions. Earlier, toward the end of the presentation that was made, as was mentioned there, in Q1, the are as on the right-hand side.

Speaker #1: In total, there were 11 such projects or transactions we determined excluding seven that are release of policy holdings. The four that remain we have stated the specifics of the four divestments.

Speaker #1: And at this moment, we cannot necessarily say what the percentage of completion in terms of portfolio review is. We would like to continue to increase investment efficiency and rationale behind divestments as we determine them going forward.

Speaker #1: We will be able to see how much of the review is completed. And we have already developed a structure for this. And the time schedule as well.

Speaker #1: And so under what's been determined, we would like to continue to steadily proceed with these divestment projects. I hope I answered your question. Well, thank you.

Speaker #1: So if your divestments are made with prices that are higher than you expected and would you return the surplus for shareholder return, or will it continue to use it for your growth investment?

Speaker #1: For that question as well, in our presentation of our midterm management plan, we already explained but we would like to generate core free cash flow through divestments.

Speaker #1: We would like to increase our capacity for future investments. And by generating cash from that perspective, as Massimo-san said, so growth investment for AI and others we will look at that pipeline steadily while doing so based on return we will make capital allocations.

Speaker #1: And of course, as part of that, some funding will be allocated to M&A and other growth investments. And so within the pipeline, there could be cases where there may be no potential investment we should consider and in that case, we will consider moment, we're not able to make that decision.

Speaker #1: We would like to steadily continue to solidify and increase the pipeline for growth investments going forward. Thank you. Well, so the second question, I'm sure it's difficult to make specific comments, but in May, you have indicated your intention for the sale of Kakam.com.

Speaker #1: There's been counterproposals as you proceed with divestments from the viewpoint of maximizing shareholder return. Would you try to maximize the sales surprise or strategically or in terms of the possibility of the sale?

Speaker #1: Would you consider the deal more comprehensively? So that's my second question. Thank you again for the second question. Katsuki-san will answer your question. Thank you.

Speaker #1: Thank you for your question. Regarding Kakaku.com, TOB offers are being made from both sides. An inclusive of Kakaku.com's special committee very careful discussions are ongoing.

Speaker #1: Kakaku.com's existing shareholders? Of course, and KDDI shareholders for them as well. A benefit and the interest of such shareholders must be considered first and foremost as we proceed with this transactions.

Speaker #1: That's how we should treat this. So it's not the special unique circumstances of ours that would determine this. We would like to make decisions based on economic rationale and the economics of this.

Speaker #1: That would be the case. Thank you very much for your answers. That's all for my questions. Thank you, Hosei. Next question is from Mr. Kikuchi from SMBC Nikko Securities.

Speaker #1: Please unmute. My name is Kikuchi. Hello. Thank you. On page seven, related to Massimo-san's question, and I'm a bit persistent about this, but in Q1, you had the memoir provision and your revising it.

Speaker #1: You know, if you had in corporate this, you could have done this in the previous year. So maybe there has been some upside to this.

Speaker #1: And also if you look at the details in terms of financial businesses, I think there may be a downward factor because of the higher interest rate, but because there wasn't I think upside, I think maybe that was the reason.

Speaker #1: And also same thing with the devised prices as well. So you have the upside. So if, you know, operating profit it seems as though, you know, you don't want to make an upward revision.

Speaker #1: And is that the reason why you're making a strategic cost or strategic investment in the second half? Because you know, if there's an upside, can I expect it to be an upside or would that be different?

Speaker #1: And in terms of divestment, so if it's included in Q1, where is it included? So that's my first question. Thank you. So with regards to the revision in memoir, this is the revision of provision rate for memoir's least receivables.

Speaker #1: We implement this every year based on the track record. And in this time, in calculating the future default risk, among which we have made a provision for before, we deem that some of the cost will not be occurring so because of the dollar has on overall has declined and therefore we felt that default rate or loss risk had deteriorated.

Speaker #1: Therefore, we provisions. And that is why we see revisions in least receivable provision rate. In terms of the impact, this is something that we were able to foresee from the planning.

Speaker #1: So we have already included this in our initial guidance. Now, in terms of the assumption and the track record of this provision going forward, we will make sure that we revise it accordingly in the future.

Speaker #1: So others, in terms of the overall business performance, Q1, whether there's an upside against the internal plan? Yes. So it performed better than our internal plan.

Speaker #1: So we want to maintain this upside outperformance of the plan, but I have been saying from before we have future cost or cost spending investment for the future as well.

Speaker #1: So on the full-year basis, we have not made any revisions to the outlook. That is all. Does that answer your question? Yes. Thank you.

Speaker #1: So the second question. So I think your performing well overall basis. So I want to do a little bit of a deep dive into your business area.

Speaker #1: So in increasing profit of the business growth, the factor for that? Increasing profit is in the data center page, EBITDA is growing. But operating income, because data center has a lot of write-off, so it doesn't clearly say that there's a growth in operating income.

Speaker #1: So because there's a lot of depreciation, amortizations and speculating that. Not much operating income here. So if that's the case, then where does this increase in profit come from?

Speaker #1: That's what I'd like to know. Thank you. Thank you for that question. Hosoi will answer this question. Thank you. For the question. Thank you.

Speaker #1: In terms of profit, from this fiscal year, the way we actually book a depreciation amortization has changed the standard has changed. So that is why profitability has changed slightly.

Speaker #1: And we will continue to follow the same standard going forward. There are increase in data centers, both increasing floor space and increasing new builds.

Speaker #1: So there's consistently new data centers. So I think we will continue to see cash outs. So we do not believe that this will change significantly.

Speaker #1: That is our view. So let me supplement from IR. With regards to data center, in the disclosure data book, we do have information on adjusted operating income in terms of the track record for Q1.

Speaker #1: It was 6.9 billion. Year on year, this is 700 million increase. So please refer to that as well. Thank you very much. If that's the case, so the area there's an increase in profit is you have explained different parts of the business where there's been increase in profit.

Speaker #1: And that's where it is, right? So it comes from different areas. And that momentum will continue. Is that the case? Yes. That's the right understanding.

Speaker #1: Thank you very much. That is all from me.

Speaker #2: Thank you very much. The time to close is fast approaching. We would like to have the last step person ask a questions. Tanaka-san, from BOFA Securities, please unmute and state your questions.

Speaker #2: BOFA Tanaka, thank you very much. I have two questions. Question number one, page seven, telecom core increase in profit. Outside of mobile communication revenue, 14.7 billion.

Speaker #2: Or rather, 16.4 billion. And a larger item in this is increase in revenue from devices. Well, if my understanding is not correct, please correct me.

Speaker #2: What is the largest factor? Thank you for the question. I would like to turn to Sasaki-san for answer. Thank you for your question. So outside of communication, revenue, and profit, what has contributed to profit?

Speaker #2: The large one is promotional expense, suppression or reduction in promotional expenses is a large factor behind this. Since last year, consistently we have said that we're focusing on lifetime value, LTV, as we try to acquire new customers.

Speaker #2: So customers who have contract over a short term, we are reducing expenses for them. So that we can allocate more expenses and costs to customers who are on a longer contract.

Speaker #2: And by so doing, we are controlling promotional expenses. And that has increased efficiencies, which is having an impact. And at the end of last year, we reviewed accounting standards for the historical cost for a short-term contracts that's been amortized.

Speaker #2: And therefore, that also contributed to reduction in cost. So reduction overall in promotional expenses from those sources and that accounts for a large part of increasing profit from communication business.

Speaker #2: So how much would that be in terms of the impact? Promotional cost for contributing to the profit. That's about two-thirds outside of communication revenue.

Speaker #2: So year on year, if that's the case, do you think that this will continue into Q2 and the second half? Yes, I think that understand is correct because our policy remains the same.

Speaker #2: Okay, thank you. My second question. So reduction in profit in financial business. You talked about valuation losses. What would be the amount of that?

Speaker #2: And secondly, housing loans and credit card loans. They are growing steadily. Credit cards as well. And yet you're talking about reduction. In profit, I wonder why.

Speaker #2: And will this continue for some time to come? Will this be prolonged? I would like to know. So that's about financial business. Thank you very much.

Speaker #2: Katsuki-san will answer your question. Thank you for your question. First, mark the market losses or valuation losses. This has to do with increase in long-term interest rates.

Speaker #2: Because that happened. Fixed rate housing loan asset we're applying mark to market with increasing long-term rates. For the increase in the rate, in terms of calculation, roughly 2.4 billion yen of mark to market losses were posted and that's factored in in the initial plan.

Speaker #2: And this is something that we have said before. And our loan to deposit ratio is over 100%. So there's very robust demand for housing loans.

Speaker #2: And we have been providing loans quite actively. And therefore, loan assets have increased quite substantially. And we're applying a. Be as controlled or in order to control liquidity more, this term we have suppressed providing housing loans.

Speaker #2: So as a result, there was negative impact from mark to market losses as a result. And however, it's compensated for by a robust revenue from the bank business and credit card issues.

Speaker #2: Therefore, while in Q1, minus 3.7 billion. And we would like to continue with control of liquidity. We would like to restore liquidity so that we can further grow next year and onward.

Speaker #2: So we're in a transition period doing so. If you could understand so, thank you. So seen from the outside, housing loan balances increasing steadily, but you are trying to change the makeup.

Speaker #2: And the revenue from housing loan commissions are down. Therefore, negative. Is that correct? Yes. And do you think you will be able to eliminate this problem by the end of this fiscal year?

Speaker #2: So what would be the timeline for balance sheet control? And by when will you be able to resolve this so that you can grow again?

Speaker #2: Well, we would like to continue to work on this problem this year so that we can grow next year. So the balance of deposits, which is the sourcing which is the source of funding for housing loans, we will have to gather deposits.

Speaker #2: As was presented earlier, the balance of deposits has increased 1.3 times YOY. I'm talking about retail deposits. And so I believe that we can expect quite a good recovery and growth again.

Speaker #2: And loan balance. Housing loans have low margin, but not only that, we also have consumer finance and card loans where margins are higher. So per loan, the amount, the ticket size is smaller, but margins are higher and by moving more toward such products, we would like to make sure to improve the margin.

Speaker #2: And create a favorable cycle of funding for the bank. And so that is something that we would like to work on this year so that we can grow again, start growing again next fiscal year and onward.

Speaker #2: Thank you for your answers, Tanaka-san. Thank you. Now that time is up, but with that, we would like to conclude the earnings briefing for Q1 of the fiscal year ending.

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