Performance Analysis by Segment • Consolidated Financial Statements • Corporate Overview / Stock Information
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Highlights Our Management Our Value Our Future Our Governance Financial Information • The Japanese Market and KDDI • Analysis of the Consolidated Statement of Income • Analysis of the Consolidated Statement of Financial Position • Analysis of Capital Expenditures and Cash Flows • Performance Analysis by Segment • Consolidated Financial Statements • Corporate Overview / Stock Information Performance Analysis by Segment Personal Services Segment (Years ended March 31) The Personal Services segment provides services to individual customers. In Japan, KDDI aims to provide new experience value by expanding and coordinating various life design services, including those related to commerce, fi nance, entertainment, and education, while focusing on conventional telecommunications services, chiefl y under the "au" brand, such as those related to smartphones, cell phones, FTTH, and CATV. Overseas, we use know-how cultivated in Japan to actively engage in business with individual customers, especially those in Myanmar, Mongolia, and other Asian regions. Overview of Operations in the Fiscal Year Ended March 31, 2020 Operating revenue increased 3.3% year on year to ¥4,568.0 temporary factors suppressing profit*2 in the first half despite a billion. A decrease in mobile handset revenue was offset mainly 22.4% year-on-year increase in operating income in the life by higher revenue from “au” total ARPA*1 and MVNOs and the design domain that exceeded initial forecasts. effects of consolidating ENERES and Jibun Bank. *1 au ARPA revenues + Value-Added ARPA revenues + Handset Repair and Operating income fell 1.3% year on year to ¥872.7 billion, Compensation revenues + au Denki revenues *2 Mainly accelerated amortization for the suspension of 3G service on March 31, due mainly to expenses incurred for sustainable growth and 2022 and effects due to the change of fi scal year in the Myanmar business Operating Revenue Operating Income/Operating Margin EBITDA/EBITDA Margin (Billions of yen) (Billions of yen)(%) (Billions of yen) (%) 5,000 1,000 50.0 1,600 60.0 1,519 1,520 4,568 4,550 4,422 884 873 875 1,400 4,000 800 40.0 1,200 45.0 3,000 600 30.0 33.3 31.7 33.4 800 30.0 2,000 400 20.0 19.1 19.2 20.0 400 15.0 1,000 200 10.0 0 0 0 0 0 2019 2020 2021 2019 2020 2021 2019 2020 2021 (forecast) (forecast) (forecast) ˾˾ Operating Income (left) Operating Margin (right) ˾˾ EBITDA (left) EBITDA Margin (right) au Total ARPA au total ARPA rose ¥330 thanks to expansion in “au Denki” ARPA, which increased ¥130 year on year driven by a steady (Yen) 8,000 8,040 increase in contracts, and to an increase in value-added ARPA 7,770 7,770 830 7,650 690 650 that was driven by growth in the percentage of “au Smart 7,450 7,460 730 7,450 540 670 7,170 490 530 Pass Premium” members and its expanded use for payments 7,000 350 570 and commerce. We expect au total ARPA to continue expanding from the 6,000 fiscal year ending March 31, 2021 onward driven mainly by “au 7,430 7,760 Denki” ARPA and value-added ARPA. 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2019 2020 ˾˾ au Total ARPA ˾˾ Of which, “au Denki” ARPA 52 KDDI CORPORATION | INTEGRATED REPORT 2020 au Churn Rate The au churn rate increased in the first half due to a temporary surge in demand ahead of a consumption tax hike and the (%) 1.2 amendment of the Telecommunication Business Act in October 2019, but the rate fell significantly in the second half as the 0.98 2019 0.9 0.76 overall liquidity of the market declined. As a result, the full-year 0.77 0.75 0.72 0.75 rate was 0.72%, down 0.04 percentage points year on year. 2020 0.6 0.71 0.72 To reduce the au churn rate, KDDI continues to enhance 0.64 0.61 engagement with customers. 0.3 0 1Q 2Q 3Q 4Q Full year Life Design Domain Overview of Operations in the Fiscal Year Ended March Operating Revenue Operating Income/Operating Margin 31, 2020 for the Life Design Domain (Billions of yen) (Billions of yen) (%) 1,500 200 20.0 Operating revenue expanded 28.8% year on year to ¥1,218.0 190 180 billion mainly owing to higher revenue from not only the energy 1,290 1,200 1,218 15.5 3 3 150 14.8 15.0 field,* and the settlement and finance field,* but also “au 14.7 946 147 Smart Pass,” commerce, repair and compensation. 900 100 10.0 Meanwhile, operating income grew 22.4% year on year to 600 ¥180.0 billion, owing mainly to higher income in the energy 50 5.0 field, driven by a steady increase in “au Denki” contracts, and 300 higher income in the content field, driven by strong results in 0 0 0 “au Smart Pass,” repair and protection. 2019 2020 2021 2019 2020 2021 *3 Including consolidation effects mainly of ENERES and Jibun Bank (forecast) (forecast) ˾˾ Operating Income (left) Operating Margin (right) Number of “au Smart Pass” and “au Smart Pass (Million members) 16 Premium” Members 15.22 15.53 15.49 15.50 14.47 The number of “au Smart Pass” and “au Smart Pass Premium” 12 members increased 10 thousand compared with the end of the previous fiscal year to 15.50 million. Of this number, member- 9.65 8 ships of “au Smart Pass Premium,” which is a sophisticated 7.30 version of “au Smart Pass,” increased 2.35 million year on 4 4.30 year to 9.65 million (growing to 62% of all “au Smart Pass” memberships) due in part to the provision of more special 0 0.49 benefits for members as well as the effects of expanding the 2016 2017 2018 2019 2020 scope of services to encompass non-“au” customers. ˾ au Smart Pass ˾ Of which, au Smart Pass Premium Reference: “au Smart Pass” is a package service for a monthly data fee of ¥372. Around 500 apps, data storage services, coupons, repairs, protection and more are accepted. “au Smart Pass Premium” is a sophisticated version for a monthly data fee of ¥499. Three Fields of the Life Design Domain (Billions of yen) Content field: The profit contribution from “au Smart Pass” is significant, and the profit 1,290 margin is higher than other fields. We are working mainly to strengthen entertainment 1,218 functions for the 5G era and cooperate with the financial and commerce field. 946 Energy field: The profit margin is low, but the number of users is steadily increasing and the growth rate is the highest. In addition to helping expand sales and enhance engagement, this field is showing that its profit contribution ratio is increasing. Financial and commerce field: The field is in the phase where active users are rising, 2019 2020 2021 (forecast) and we are spending to ensure medium-term growth. We aim for future profit ˾˾ Content field ˾˾ Energy field contributions and expect the field to help enhance engagement with “au” users. ˾˾ Financial and commerce field KDDI CORPORATION | INTEGRATED REPORT 2020 53 Highlights Our Management Our Value Our Future Our Governance Financial Information • The Japanese Market and KDDI • Analysis of the Consolidated Statement of Income • Analysis of the Consolidated Statement of Financial Position • Analysis of Capital Expenditures and Cash Flows • Performance Analysis by Segment • Consolidated Financial Statements • Corporate Overview / Stock Information Main Initiatives of the Personal Services Segment Launch of “UNLIMITED WORLD au 5G” Alliance with OTT Services in the 5G Era In July 2019, KDDI began offering the smartphone pricing plan For “au,” KDDI offers many unique original plans that combine “au Data MAX Plan.”*1 The plan has been well received as data telecommunications and entertainment content. Japan’s first*2 unlimited monthly data plan,*3 and the percentage In March 2020, we announced we would offer the Data MAX of people signed up for this and other high-volume data plans is 5G ALL STAR Pack from June 2020, pairing unlimited data*3 steadily growing. In addition, we began offering the Kaetoku with popular entertainment content (Netflix (basic plan), Apple Program in February 2020 with the aim of making it easier to Music, YouTube Premium, and TELASA). get the latest smartphones. This is the first fixed residual value Offering Unique Pricing Plans Incorporating Value-Added Services smartphone purchasing program offered by a telecommunica- 4 tions carrier in Japan.* Data MAX 5G ALL STAR Pack In this way, KDDI is steadily moving ahead with revisions to its pricing schemes for the 5G era. ¥5,460 per month for six months starting from the month after signup Example of the Kaetoku Program SSavingsavings 2 If you buy a new device in the 25th month and the Company takes back the current device, (For a device that costs ¥96,600) you do not need to pay the remainder!! SSavingsavings 1 You can lock in lower monthly payments! Final (24th) payment of This is a plan that only KDDI can offer because the Company ¥38,640 has garnered attention in the life design domain since early on, Smartphone No Payment ¥2,520 ¥2,520 …¥2,520 Needed purchased steadily building good relationships with over-the-top (OTT) 1st month 2nd month 3rd month … 24th month 25th month media services. KDDI can offer customers an attractive service lineup, and Cash sales price/total payment: If ¥96,600 ((installment payments: ¥2,520 × 23) + (fi nal (24th) payment: ¥38,640)): “au” acts as the distributor for OTT services. By pairing OTT Annual rate: 0% Down payment: ¥0 Number of payments: 24 services with “au” telecommunications plans, which have a Payment period: 26 months churn rate of less than 1%, customers can use these services Then, in March 2020, KDDI began offering “au 5G’ commercial for the long haul, making these plans a win-win for us both.