Performance Highlights and Q&A for the Third Quarter of the Fiscal Year Ending March 2024

Communications ARPU revenues are trending on track overall, and although the Q3 was negative 900 million yen year on year, the year-on-year gap has narrowed from Q1 to Q3, and if this trend continues, we expect the trend to turn positive in Q4 and continue to be positive in the next fiscal year.
One of the factors behind the somewhat weak communications ARPU was the somewhat weak voice portion; the impact of the COVID-19 pandemic may have led to slightly different expectations for voice portion, which had been strong in the previous year.
However, the data portion is steadily growing and is expected to continue to grow.
Q4 usually tends to fall due to seasonal fluctuations, but we believe we can successfully bring it to a flat or better level. Please rest assured.

The main factor behind the 16.7 billion yen in the "other" was a 11.5 billion yen decrease in depreciation and amortization, which boosted profits.
The quarterly fluctuation of depreciation and amortization expenses is not large and the figure is the result of the accumulation up to the Q3.
There is also a positive impact from increased product supports ARPU revenues related to support for in-store setup and other services, although we cannot provide details of the figures.
On the other hand, there was an increase in costs and handling fee associated with handset sales promotions, which offset the increase in product supports ARPU revenues. Because of heavy sales promotions especially in Q3, the positive margin did not increase from Q2 to Q3.

You are right about the churn rate.
As for the details, the churn rate for au has improved, while the churn rate for UQ mobile has slightly increased.
The reason for the increase is for customers who contracted for the SIM only, and there is no significant change for UQ mobile customers who contracted for a set of handsets.
As for the prospects for Q4, the revision of the Business Law also regulates the sale of SIMs on a stand-alone basis, and we no longer have to spend a large amount of money on customers contracted on a stand-alone basis for SIMs, as was the case until Q3. As a result, the churn rate in Q4 is expected to move in the right direction. On the other hand, regarding the liquidity of handsets sales due to the revision of the Business Law, sales increased until December 26, the effective date of the law, including a rush, but declined after December 27.
However, the decline lasted for about the first two weeks. Since then, the sales have gradually recovered, and now there is no significant difference from the previous year, and we would like to accelerate handset sales and work on a solid increase in the number of IDs for the March sales season.

The impact just before and after the revision of the Business Law was significant, but after that, we believe that the business has returned to the same level as before.
We would like to rollout handset sales so that it will be on par with the previous year as much as possible, leading to increases in the number of IDs, Communications ARPU, and Communications ARPU revenues.
In terms of costs, there are acquisition costs, but due in part to the impact of IFRS, there is no significant impact in a single year, making progress in the right direction.

Regarding this fiscal year's performance, we need to further improve our competitiveness from Q3 to Q4, and particularly in Q4, we plan to spend accordingly to ensure our competitiveness.
However, we will continue to seek 1.08 trillion yen in consolidated operating income as forecasted at the beginning of term.
We will give an overview of the next term along with guidance at the time of the next announcement of the main financial results. Since we have been steadily increasing income so far, we will continue to consider the trend of increasing income, and there is no change in our plan to rebound mainly in the au business.

ARPU is recovering steadily.
ARPU for each brand is steadily expanding; au saw an increase in MAX plans due to strong sales of au Money Activity Plan, etc. UQ mobile also saw very strong sales of its "Komikomi Plan," and the ratio of medium and large usage plans, including "Tokutoku Plan," is increasing. Communications ARPU revenues are expected to continue such trend.
Access charges are expected to fall from last year, and overall Communications ARPU is also expected to increase year-on-year.
The churn rate is also expected to return just like sales, although the data for January is not yet available, and there is an impression that churn increased a little from December to January, partly in reaction to the rush.
We do not yet know the outlook for whole Q4, but liquidity is expected to return despite the impact of the revision of the Business Law. We hope to somehow keep it at the same level as the previous year.
Acquisition costs will not have such a significant impact in a single year since they can be deferred under IFRS, but there will be a slight increase for the current term.

There was no M&A impact in the first half of the current fiscal year, and the impact of Canadian data centers and the integration of the contact centers were added from the Q3. In addition, the impact of fuel price hikes, which had reduced profits in the first half compared to the previous fiscal year, was eliminated from the second half, resulting in an increase in income.
For the current fiscal year, we will make steady progress toward our target of double-digit growth in operating income, set at the beginning of the fiscal year.
In the next term, the impact of M&A, which began in the second half of the current term, will be recorded for the full year, and the NEXT Core business is growing steadily in all 3 categories, so the company will continue to achieve solid growth as we did in the current term.

As for the competitive environment, particularly for Rakuten Mobile, I think new corporate customers are increasing as you mentioned.
There is talk of the 6 million lines mark, but at least there has been no significant change in either Mobile Number Portability or roaming traffic, and there has not been a significant impact on both personal and corporate businesses.

We are currently working on various initiatives for the next term, the accumulation of which will determine the starting line for the next term.
We are in the process of reviewing the operating revenues and profits in our medium-term plan, and we ask you to wait until the announcement of the main financial results for specific figures and breakdowns of next term.
However, we are still aiming for growth, and since we have identified the Business Services segment, energy, and financial business and etc. as focus areas, we hope that you will consider the trend of increasing income in these areas and etc.