SoftBank Corp

TSE:9434

Earnings Call Transcript 2024-Q1

[Operator]

Thank you very much for waiting. We would now begin SoftBank Corporation Earnings Results Presentation for the three months ended June 30, 2023. We would like to introduce today's attendees. SoftBank Corporation President and CEO, Miyakawa; Board Director, Executive Vice President and CFO, Fujihara; Today's briefing will be broadcast via the Internet.

President and CEO Miyakawa, will give an overview of SoftBank's consolidated financial results and business overview.

[Junichi Miyakawa, CEO]

Hello, this is Miyakawa. Thank you for your participation. I would like to explain our business results for the first quarter. I would like to explain our business results, but before that, as part of the medium-term management plan announced recently, we've decided to change the name of our business segments. The new segment names are as shown here. As you can see, there is no change in the content of the segments. Revenue was ¥1,429.7 billion, an increase of 5%. Looking at revenue by segment, all segments enjoyed an increase in revenue. Operating income was ¥246.3 billion, an increase of 2%. Operating income by segment, as for consumer business, operating income decreased by 4%.

However, we expect an increase in operating income for the full year. Enterprise, media and EC and distribution do three businesses reported higher revenues. These businesses made a good start toward the target of double-digit profit growth for the full year. For business, in terms of performance, the business has seen a significant improvement in operating income. If we were to consolidate paper from the beginning of the last fiscal year, it has improved by ¥3.4 billion.

As a result, the performance in Q1 is progressing smoothly according to the plan towards the annual target. Good net income was up 15%. Here is the consolidated result. Both revenue and income increased. As for the progress rate, operating income was 32%, and net income was 35%. This is a good progress toward achieving the plan set out at the beginning of the fiscal year. The progress rate of operating income by segment is as shown here. The progress of the consumer business is 31%, which is better than we expected at the beginning of the fiscal year.

In summary, we believe that we are making positive progress toward achieving the three goals outlined in our medium-term management plan. As for business results by segment, I will start with consumer business. Revenue was up 0.2%. The mobile sales turnaround is one of the goals of our medium-term management plan. But as you can see from the amount of decrease from the previous year, it has narrowed significantly. Here is the introduction of the new pricing, which began in the spring of 2021. Every quarter, I have had to report on the impact of the mobile service price reductions, and I have been standing on this stage with a sense of shame. We have been very concerned about our shareholders and investors, but at last, we can clearly see the exit from this long tunnel. Operating income was down 4%. However, consumer business operating income progress rate was already 31%. So this is also on track toward our full-year profit increase forecast.

The net additions of smartphones and main subscribers were both strong continuing from last year. In the last fiscal year, the net increase in smartphone subscribers was 1.68 million, and we expect the net increase to be close to this level this fiscal year as well. So this Q1 was also favorable for number portability. So this number portability was strong and we were all positive against other carriers. As a result, the cumulative number of smartphone contracts increased by 6% towards our goal of 30 million subscribers. We are steadily progressing.

Next I will explain about enterprise business. This year, totaled ¥184.1 billion up 4% year-on-year. Solutions continued to drive the growth with a 17% increase. This is a growth driver for enterprise business. Operating income was ¥39.4 billion up 8% year-on-year. Solutions are performing well with 18% growth and recurring revenue. We expect the solution for a generative AI to contribute in the future. So this is an area where we are looking forward to further growth. Next is media and EC business. Yesterday, as Z Holdings made a presentation, I would like to brief on it. Revenue was ¥385.2 billion 2% up year-on-year.

Operating income was partly due to a one-time gain on the transfer of business. It was up 31%. Next I will explain about financial business. Revenue due to the consolidation of pay-pay increased by 28 times. Operating income due to the impact of making pay-pay subsidiary from the third quarter of the last fiscal year decreased income. Next, if we assume that pay-pay had been a subsidiary since the beginning of the last fiscal year, the actual performance has improved significantly. Pay-pay revenue was ¥48.0 billion up 41% year-on-year. The previous year's revenue growth was ¥11.9 billion, but this year was ¥13.9 billion when compared, the increase is even more remarkable. Consolidated EBITDA was ¥1.7 billion, achieving first profitable quarter.

GMV of SB Payment Services, which provides payment processing services, reached ¥1.9 trillion, a 21% increase year-on-year. In particular, the non-communication domain grew by 29% year-on-year and is growing in a matter exemplary of beyond the carrier. Operating income was ¥2.8 billion, an increase of 15%. The company is steadily growing year-by-year. As for pay-pay securities, the number of point investment users has exceeded 11 million. This is the largest number in the industry of point operations. So in about three years, the pace of reaching this number is the fastest in the industry.

Next, I'd like to talk about ESG. The DJSI is an ESG rating. We have been focusing on acquiring this rating because we believe it is an important rating from the perspective of long-term business operations. What is DJSI? DJSI analyzes companies from the three perspectives, economical, environmental, and social performances, and only those companies in the same industry that excel in sustainability are selected for inclusion in this index.

There are regional ratings such as DJSI Asia Pacific and global ratings such as DJSI World, which is one of the most important ESG ratings for investors. SoftBank has been selected for the first time for inclusion in DJSI's highest rating, DJSI World. I'd like to explain in detail how we are positioned in this selection process. There are approximately 60,000 listed companies in the world. The DJSI World list is made up of 333 companies from all over the world. Of these 333 companies, Japanese companies were 37. Among them, we received the number one score. We are honored to be the only Japanese telecom company selected for this award. We will continue to focus on ESG when running the business.

Now I'd like to talk about the status of corporate financing. In July, we issued ¥120 billion in straight bonds. In addition, we plan to issue ¥120 billion of bond-type class shares during this fiscal year. The purpose of straight bond is to lower financing costs, lengthen debt maturities, and fixed interest rates. The purpose of bond-type class shares is to strengthen the company's financial base and invest in growth areas. As part of our financial strategy, we have been working hard to secure long-term debt and fixed rate as much as possible. During the ¥120 billion in straight bond insurance, the fixed rate ratio is 85%. We have been strategically preparing for the risk of rising interest rates as has been happening overseas.

The next section describes the bond-type class shares that we are planning to issue. This bond-type class share is scheduled to be listed on the Tokyo Stock Exchange's prime stock market and is the first attempt of its kind in Japan. We submitted a proposal to change the articles of incorporation for this issuance to the general shareholders meeting in June, which was approved by 98% of the shareholders. The purpose of this issuance is to enhance the company's capital and strengthen its financial base. We plan to issue ¥120 billion, which we expect to issue in Japan during the current fiscal year. The good thing about this type of instrument is that it will increase equity capital without diluting the value per share. The main use of this fund will be to invest in growth areas that will enhance corporate value over the medium to long-term. The main areas of investment will be in generative AI, next-generation social infrastructure, and renewable energy.

Talking about generative AI, I'd like to talk about what we are working on. If you look back at the history, there are technologies that have become an integral part of our lives, such as search engines, operating systems, and the cloud. But we believe that generative AI will be a technology of incomparable importance. However, if you look at the current situation, the only major players developing large-language models are foreign companies. These generative AIs are being developed based on English and Chinese data set, and information and thought patterns based on these languages have been built up. The significance of developing a domestically produced generative AI is that it will be developed on a Japanese-language data set, making it more suited to Japanese business practice and culture. In particular, we believe that it will be able to handle unique expressions in Japanese, such as those used in public and medical services. As you can see, we have those three advantages. We have in the prime position to develop made-in-Japan generative AI.

First, let's talk about computing. As announced recently, we have purchased SuperPRD, or SuperPod, which is most suitable for building a large-language model at approximately ¥20 billion for the in-house development of Japanese generative AI. The computing platform we are building will have the largest computing power in Japan. This computing platform has been qualified by the Ministry of Economy, Trade and Industry and expected to receive a grant of ¥5.3 billion. The products have been delivered to us as we speak, and we are now beginning to assembly. Set up will take about three months, so we are planning to complete it by the end of next month.

Next, let's talk about engineering resources. To build a generative AI, you need to prepare a dataset, develop an algorithm, and train a model on it. We decided to bring together the experienced engineers in the software group and create the product in an speedy and organized manner. We founded SB Intuitions, a wholly-owned subsidiary, and has been in full operation for development since August 1st. Finally, about overwhelming customer touch points. We have a large amount of teaching data, which allows us to create a highly accurate generative.

Furthermore, our group has varieties of products and services and can reach most of the Japanese public. So, we can immediately deploy the developed AI to a large number of users, which we believe is a unique strength of our company. In addition to building generative AI model, we also provide B2B applications to utilize generative AI for business purposes. We recently announced a strategic alliance with Microsoft, a leading partner in the field of generative AI, and I'd like to touch up on that. Microsoft, as you know, has invested more than ¥1 trillion in open AI and is the leader in the commercialization of generative AI, exclusively using GPT-4 in Azure 365 and other applications. Although there is a high demand from local governments and enterprises to utilize generative AI for businesses, they are extremely cautious about using their own internal data.

So, Microsoft and SoftBank discussed and agreed to strike this strategic alliance. So, we can maximize the strength of 5G network and cloud operators' strength to deliver a secure environment to use data for generative AI. We hope to help corporate clients to accelerate their digital transformation journey by leveraging respective strength to above two companies. Microsoft and SoftBank have a strong customer base and will collaborate to provide secure AI-powered services to enterprise customers. We have decided to participate in the co-pilot early access program starting August 2023. We will be the first to thoroughly utilize co-pilot in our company and will provide knowledge and expertise gained from this experience to Japanese customers.

We are working on development of a platform for domestically produced generative AI while providing B2B application to utilize generative AI for business purposes. We will not only develop our own large language models but also establish a multi-generative AI system in which we select the most appropriate model for our client's needs from among multiple models developed by OpenAI, Microsoft, Google and other companies.

With this policy in mind, SoftBank is committed to enhancing the productivity of Japanese companies through the use of generative AI. Let me summarize what I discussed today. Both revenue and income increased and both operating income and net income exceeded 30% of the progress rate, which is a good start toward achieving the forecast. PayPal's Consolidated EBITDA was positive for the first time in a single quarter. We were selected for the first time as a component of the GJSI world and also I talked about our initiatives in generative AI. We will continue to strive toward our philosophy of information revolution, happiness for everyone.

[Operator]

Thank you very much for your kind attention. We will now open up to a Q&A session. We will take questions first from the floor, then from the Zoom media followed by Zoom analysts, institutional investors. If you wish to ask a question via Zoom, please access Zoom via the previously announced procedure and press raise the hand button. Once you have accessed Zoom, please turn off the live webcast to prevent howling. Today, we would like to accept as many questions as possible from as many people as possible, so we would like to limit two questions per person. Thank you for your understanding. Once you are appointed, please provide your name and your affiliate. Please raise your hand. First in the middle, the very first wearing black polo shirt. Please wait for microphone.

[Unidentified Analyst]

I'm Freelance [indiscernible]. It was not mentioned in the presentation regarding the Starlink service proposition. As far as I know that you have one web and you invested in your own things, but I think that Starlink just came out of the blue. Mr. Miyakawa, you have been engaging and perhaps and why at this point you engage in Starlink. What are the factors for this?

[Junichi Miyakawa, CEO]

Thank you so much for your question. As for Starlink, it's not that we really wanted to utilize, but we wanted to utilize, if anything is good, non-terrestrial network, NTN. As for 6G, this will be a very important component. For that, we will be utilizing Starlink, one web, and HAPS. This is how we are looking at. If just like HAPS, if no makers being successful, then we would be doing it by ourselves, but something like Starlink, which is already providing such, then we would like to utilize it. I would like to, we are considering the differences between one web and Starlink. As for Starlink, low cost and best effort service style, which we assume that we can provide service for many different customers. While one web, this is the bandwidth guaranteed service, which is probably used for enterprise customers.

The consumer segments, good business performance, you asked the reason for that. To answer this question, regarding APU, it will go down gradually, and the next year will be at the stable level, I think. We need to expand the area to cover first, and the total coverage and an area, if we could make it positive, then I think it's the right way. We have been working on that strategy around that. When you also visit a shopping center, you may think that it's too much noise, and we are focusing on sales promotion. This is our lively sales promotion. So after COVID, it is much easier for us to do activities in terms of sales. So I think that's one reason. I hope I answered your question.

[Unidentified Analyst]

First, computers launched new price plans in the quarter. I wonder if that could have any impact on Softbank. Second question. Roaming for emergency. The government decided not to pay a burden in regards to the price plan by the competitors.

[Junichi Miyakawa, CEO]

Thank you very much for your question. We are in good shape. I don't think that that drastically changed competitive environment. In fact, net ads, we believe that we can reach the same level as last year. So I don't expect any impact from the new price plans by the competitors. For full roaming, I don't remember. I said that I paid the price of full roaming, but nonetheless, there are different ways to deliver that kind of services for roaming or dual sim, etc. Since Japanese customers are often heavily impacted by disasters like typhoon, roaming, in the case of disaster, yes, I think it's right for carriers to pay the price, but roaming in weak coverage area, then different approaches may be needed. So it's just case by case when it comes to roaming between operators. In any case, we should be better prepared for disasters and outage. There are a lot of risks that we need to be prepared for, so we will continue discussing with the government. Thank you.

[Operator]

And the next, the left side in a blue long shirt. Please provide your name and your affiliate. Thank you.

[Unidentified Analyst]

My name is [indiscernible]. I have a question about generative AI. You've just mentioned about the status of the development. For the enterprise services, when are you planning to provide services for enterprise customers? If not planned yet, by when you would like to start providing it? That's one first question. And the next is about Line. Line also has been developing a hyper clover and related generative AI. So do you have any plans to provide generative AI with line as for the service offering timing, depending on what Microsoft co-pilot.

[Junichi Miyakawa, CEO]

We go along with the Microsoft schedule, and once we receive a green light from Microsoft, we would like to start providing the service. So introductory kit for generative AI has been provided to our customers for two months now. And to introduce our different customers, how to use generative AI. And we are selling induction generative AI kit. So not only Microsoft, but we are planning to do to handle Google products. So we would like to consider positively and our own generative AI. The timing would be for the next full year. It'll be a preparatory term and hyper clover X and hyper clover of Line. I think we'll be deploying it in many different ways. So within our group, who does and who doesn't, it's not something that we should judge. So this is something will be organized and handled within line. Thank you.

[Operator]

Next question, please.

[Daisaku Masuno, Nomura Securities]

Masuno from Nomura Securities, two questions. First, you talked about beyond three-year midterm plan. So the next four years after a three-year business plan. So super chip, which is very expensive. You bought super chip and it's natural to build your own servers and maybe utilizing it for 5G VRAM and using it with a shared server could generate some benefits is my understanding correct. If you place your own server in the data center, maybe the data center cannot be fully utilized with your own server alone. So your server and shared servers may need to be located for VRAM and other. So my question is what's your plan for design in the data center?

[Junichi Miyakawa, CEO]

We often talk about the next generation social infrastructure, core brain, regional brain. We have a strategy to deploy next generation infrastructure. And we have three layers core brain, regional brain and MAC. Matsuno was talking about the data center and the data center for the purpose of all training is related to the core brain of the existing data centers. We are building the capability and existing data centers for our training purposes. And we got off the start earlier than planned. Again, when you talk about next generation social infrastructure, we need to select facilities and lands and networks topology. We are working on that so that we can start deploying next generation social infrastructure in four years time.

And talking about AI RAN, which should be located in the MAC, because we want to have GPU at edge computing in order to optimize site, cell site. Other than area that run sites, there are some spare capacity for memory. So data center for training. So other than the data centers for training purpose, inference servers should have a MAC function. So again, purposes would be different. In any case, next generation social infrastructure that we are pursuing is in four years or so, we want to focus on preparing for that deployment.

[Unidentified Analyst]

The second question, Line Yahoo made a financial result announcement yesterday, and talking about your own whole group, Softbank Group. Softbank will become social infrastructure while Line and Pay-Pay should work on providing services and products. So is the direction for Softbank is correct. Softbank plays a role in social infrastructure when it comes to service and product offerings, Line Yahoo and Pay-Pay will play key roles. Is that kind of design of the Softbank Group as a whole?

[Junichi Miyakawa, CEO]

Yes, that's the direction in general that we are looking at. But for example, we have a service offering called HELPO, which is 100% subsidiary of Softbank, and this is for healthcare provider. And some people may say that it doesn't make sense, Softbank has that subsidiary, which is not true, because there are different services and products to be launched. But from a Softbank case perspective, we want to again build a social infrastructure to accelerate and help accelerating digital transformation. That should be the core role that Softbank should play. And group companies like Line and Yahoo and other subsidiaries and also service and products delivered by consumer business. So again, Softbank as a carrier, want to make sure that group companies feel comfortable launching services.

[Operator]

Thank you so much. And the blue half-sleeve shirt, gentlemen, please provide your name and your affiliate.

[Unidentified Analyst]

I am [indiscernible] Newspapers. I would like to ask about the other carrier, but NTN shares to be sold by the government. So some limitations within the entity. And I think there are a lot of discussions to be considered. So if so, the entire competition among carriers would change. So please provide as your thought.

[Junichi Miyakawa, CEO]

So I would like to tell you my candid opinion about this. As for entity reorganization, that was the first and now the complete privatization. And this is coming one after another. There are a lot of different opinions or thoughts around this. But first, the discussion between the government and entity needs to be monitored. This is what I think first. And regarding fair competition point of view, the presence of entity is being organized. That's what I am aware of. So but I'd like to pay attention to this movement so that only the regulations going to be eased towards entity. So I'd like to pay a high attention to it. Thank you so much.

[Operator]

Next question.

[Unidentified Analyst]

My name is [indiscernible] writer. Impact from all MNP one-stop system, so-called one-stop system or one-click system. So how do you react to competitor's move? And do you have any view on what they call the most powerful plan by changing a roaming agreement?

[Junichi Miyakawa, CEO]

The first question about so-called one-stop system for number portability, again, number portability, like I said earlier, it's positive for us. So I don't think any problem for us when it comes to one-click by Rakuten. So the question is whether you should check ID or not. From a prevention of the crime perspective, we believe that it's important to verify user ID and I don't think data is suitable for skipping ID verification. Because with application, you can still use the voice as service. So maybe laws and regulations may need to be reviewed if such one-click contract signage is allowed. So maybe we should suggest the government to take a second look at laws and regulations. But about Rakuten, so-called the cycle plan or the most powerful plan, I don't think for now it should have any significant impact to us. But we should not confuse customers. So I believe that our team in the field have close communication with the government. Any carrier can name their own price plan in any way, but again, the most powerful plan of Rakuten, well, it's very provocative, if I may say.

[Operator]

Any other questions? We would like to take a few more questions from the floor. But those who participate online, please press the raise hand button and wait for a moment. The very first in a white shirt, please provide your name and affiliate.

[Unidentified Analyst]

[indiscernible] A detailed question is about the number of device sales. I think it has decreased. And in the earnings presentation by KDDI, they mentioned that there is the impact due to the exchange rate and so on. So what do you think about this change, the fluctuating of this device shipping volume? And what do you think of the causes?

[Junichi Miyakawa, CEO]

Since 5G, there are some regulations related to incentives. The environment, I think I regret that this environment is actually difficult for 5G to be penetrated. The Japanese yen is weakened and the device purchase price has risen drastically and we are providing installment payment system and so on. But we need to come up together to provide better options to penetrate 5G more. So CFO Fujihara. So I would like to separate consumer and enterprise. In terms of consumer, it declined just slightly, but acquisition is doing really well. So we have new customers and so the balance is well. And enterprise, I think it's just a one-time impact. So not much impact.

[Unidentified Analyst]

Thank you so much for your comment. I have additional question related to the first question recently, inflation and the higher pricing of different commodities. So some companies talking about raising price, but when there is a drastic change in pricing, so I think it has to be more flexible in terms of setting the pricing limit. So I would like to hear about your opinion. Yes, there are devices at ¥200,000 or much less expensive ones and then we have different purchasing prices as well. So in Japan, iPhones are very strong. So if we only talk about iPhone's point of view, then as you said that the raising up to 40,000 or like four times, I think it's a decent standard but we also have to make sure to prevent re-selling.

[Junichi Miyakawa, CEO]

Even though we think that ¥40,000 is a decent standard, but most importantly, 5G penetration is something that we really have to focus on and we are way behind. So I would be so much happier if things are like before.

[Operator]

Next question. Still from the floor venue. [indiscernible] Business first about MNP.

[Unidentified Analyst]

Maybe the market is not fluid because of very expensive terminals maybe, but I think you said that you are enjoying net gain from competitors. So what kind of users are coming to you and for what reasons you think from competitors?

[Junichi Miyakawa, CEO]

Thank you. I'm talking about MNP, yes, it has positive impact to us. Every month we get net gain customers from competitors and the reasons why they selected us, not theirs, what they left computers, well, because in retail shop the sales clerks were very aggressive or some people say openly and well, over the internet they selected us on their own, but joking aside, I believe that our quality is one of the good reasons why they selected us, not other carriers. Second question. The data center usage is high, especially in big cities, that's why I think you want to distribute data centers. Internet is concentrated in big cities, so demand gets concentrated in big cities, that's the reality.

[Unidentified Analyst]

What kind of challenges when you plan and implement are more diversified data centers across Japan? Distributed data centers that we are talking about, like you said, like in Kanto area, Chiba and Isen in western region, data centers are concentrated in those places.

[Junichi Miyakawa, CEO]

From economical perspective, maybe it was easy to hire people, labor cost was cheaper, and distance from seashore to the land may be favorable in those areas, but the core issue is energy in Japan, when it comes to volume that keeps growing, data volume and electricity required are growing in parallel, and the telecom industry and application companies, it's still in the growth phase in terms of data volume, so again data volume keeps growing. And if data centers only located in Tokyo and Osaka, people in Tokyo or Osaka may suffer from shortage of power, shortage of electricity, that was one of the biggest challenges or issues that we found, so we want to make sure that we locate data centers where electricity or power resources are available. From economical perspective, you may want to concentrate data centers in certain areas, and maybe we need to change our mindset. And landing stations concentrated in certain cities, maybe we need more landing stations like a Kyushu or where that helps us to structurally divisive our resources. So we are studying whether we can have a landing station in those areas from a submarine cables perspective, so we want to get prepared in 3-4 years, including sourcing materials.

[Operator]

Due to the time constraints, we would like to take this question as the last from the floor, the middle row and the white long shirt.

[Unidentified Analyst]

I am [indiscernible] from the Diamond Company, about 700 megahertz platinum band allocation of that I would like to question about. So MIC has approved, and now the policy has been approved. And when I look at the criteria, and directing has advantages I think, but area deployment and the spectrum economic value, Rakuten may have an opportunity to win over, but what do you think about that, and for a soft bank, a platinum band for SoftBank platinum band allocation. I think this is the last one and three mega mega health band ways and we would like to hear what you are thinking about in terms of three mega health band ways.

[Junichi Miyakawa, CEO]

Thank you for your question. When I look at ultimate method I think we have the lower possibility of acquiring it but this is what Rakuten was longing for a long time at earnest wish so I think Rakuten will be taking and if that happens and that time I would like to say congratulations to Rakuten and I would like to step back but whether we apply for it or not we are considering but the possibility seems pretty low but I just want to say a word as a senior in terms of this platinum band. The local area cover this platinum band is very useful and effective so I believe that this is going to be going to be set thoroughly nationwide but the efficient use for spectrum we do have a responsibility as a telecommunications telecommunications carrier so I strongly believe and we would like to expect that they would also make sure to pursue their responsibilities. I hope I have answered to your question.

[Operator]

Thank you so much. That was the last question from the venue. Now we'd like to take questions from participants over the Zoom. First, Kikuchi from SMBC Nikko Securities.

[Satoru Kikuchi, SMBC Nikko Securities]

Thank you for taking my question. I have two questions actually. First, maybe related to Matsuno-san Nomura's question. Softbank for infrastructure and service in products Line and Yahoo you mentioned those roles but when it comes to infrastructure maybe it's not easy for you to make profit to just deliver infrastructure and you may want to add value on mobiles by delivering AI services on top of mobile and Softbank standalone profit you want to pursue there are a lot of consolidated companies in Japan but when it comes to Softbank it looks like a virtual consolidation. So you may want to have profit standalone or you may need to review the structure of the group Softbank group because Softbank share price when it comes to Softbank share price they are interested in Softbank standalone earnings unless Softbank contribute to Softbank standalone profit you can't really increase the value of shares.

[Junichi Miyakawa, CEO]

So I'd like to have a private conversation with Kikuchi-san actually it's difficult for me to speak publicly about this subject I mentioned earlier that we want to be a platform for our group companies well for infrastructure Softbank wants to utilize the infrastructure as well as our group companies so we are not going to provide infrastructure alone it's not what I meant whether smartphones or something beyond smartphones or something like Vision Pro or everything would need AI in the future Softbank develops and delivers such AI engine if you will is something that we should do that's why we decided to invest in developing our own AI and AI on top of mobile for consumer business yes we consider that and for enterprise business which is playing a key role for corporate customers.

We want to deliver services together with AI definitely we want to do that as a Softbank with regards to Softbank group structure we are open to any possibility what structure or what group structure should be the ultimate status of course we want to look back the history of Softbank and we are where we are because of the history so we want to understand why and how we come to this structure and we will figure out what would be the best Softbank group structure going forward thank you I hope that you will go to the best possible outcome second question free cash flow operating cash flow for the first half it was a negative and but for the whole year you may want to achieve a positive cash flow but I am concerned in the mid-term business plan so as long as free cash flow is on track or planned you can keep the dividend but even though free cash flow goes negative can you still keep the dividend and type shares if it's successful this year would you like to utilize such an instrument every year in order to compensate a cash flow.

I don't know if you have a specific plan or not I think that the Fujiwara-san may want to comment on that but ¥600 billion worth free cash flow we believe we can achieve that goal and dividend we said we will provide dividend because we are confident and we want to do that this year for ¥120 billion of class share issuance like I said earlier the fund will be utilized for investment for our future growth so it's separate from ¥600 billion of free cash flow. Fujiwara-san?

[Kazuhiko Fujihara, Board Director, Executive Vice President and CFO]

Yes investment cash flow operating cash flow compared to last year yes we were lower but because of the tax timing it was one time effect for operating cash flow and for investment cash flow more than last year because we increased CapEx last year but we plan to reduce CapEx this year so we believe that our investment cash flow goal can be achieved for class shares this is the first in in kind in Japan so we want to make sure that we issue with good terms and conditions in the market and if it's successful we will decide how to utilize such instrument going forward thank you so much due to the time constraints.

[Operator]

The next question will be the last question we would like to take Citi Group Securities Tsuruo please unmute and ask your question.

[Mitsunobu Tsuruo, Citigroup Securities]

Thank you so much for this opportunity I am Tsuruo from Citi Group Securities. Two questions. One is about the derivative AI [indiscernible] SPN three months and you've mentioned something new Line and [indiscernible] search engine and the contract renewal is coming in 2025 and as for a Softbank [indiscernible] as a whole so the last piece remaining this piece what we are trying to do with this and yesterday's their presentation by CFO and about search engine they mentioned about Bing and ChatGPT are something that to be considered as well so we would like to hear your thought around that which search engine to be used I think there are some alternatives one to continue with google or to switch to Bing or the major shareholders neighbors main engine to be used so these three could be alternatives so that's what we heard whether to switch or continue it has not been determined yet so as a parent company.

We would like to pay attention to their move the second question about pay pay pay is growth and the profit the balance between these two EBITDA turn around and the growth will be accelerating is I think do you think this is much faster than you are expectation and if so then that time of IPO is coming closer is this how I should understand. Please provide your answers as much as possible.

[Junichi Miyakawa, CEO]

As you've mentioned the balance between profit and revenue is very important for us and we still have room to grow however we cannot bear with that it's negative figure so long we have been um growing steadily so far whether this timing was a way faster or slower. I think this was the right right pace so regarding IPO I cannot make any comment. So once Pay-Pay announcement is made I would like you to pay attention to their another announcement. Thank you.

[Operator]

Thank you very much. That concludes question and answer session. Thank you very much for your questions.

[Junichi Miyakawa, CEO]

So that's all for earnings results for the three months ended June 30, 2023 of Softbank.