SoftBank Corp

TSE:9434

Earnings Call Analysis

SoftBank's Record First Quarter Driven by Broad Segment Growth

For the first quarter ending June 30, 2024, SoftBank reported record revenues of JPY 1,535.7 billion, marking a 7% increase. Operating income rose 23% to a record JPY 303.9 billion. Notably, the Financial segment, buoyed by PayPay's profitability, saw a 20% increase in revenue. Enterprise, Consumer, and Media & EC segments also showed strong performance. SoftBank's strategic alliance with Perplexity and ongoing investments in AI infrastructure underscore their commitment to leveraging technology for future growth. Net income stood at JPY 162.5 billion, an 11% rise, reflecting the company's strategic and financial robustness.

Record High Financial Performance

SoftBank Corp. reported impressive financial results for the first quarter of FY2024, achieving record highs in revenue and operating income. The company's revenue grew by 7% to JPY 1,535.7 billion, and operating income surged by 23% to JPY 303.9 billion. Net income also saw an 11% increase, reaching JPY 162.5 billion. This strong performance was observed across all business segments, with notable contributions from the Enterprise, Distribution, and Financial businesses, each posting double-digit revenue growth.

Consumer Business

The Consumer segment experienced steady growth, with revenue increasing by 2% to JPY 681.7 billion. Mobile revenue, which managed to overcome price reductions, rose by 2% to JPY 7.6 billion, and the number of smartphone subscribers grew by 4%. This segment's operating income increased by 6%, reaching JPY 156.4 billion. A strategic alliance with Perplexity, a conversational AI search engine provider, promises further innovation in this space.

Enterprise Business

SoftBank's Enterprise business witnessed a 10% revenue increase, reaching JPY 215.6 billion, with solutions and other services posting a strong 27% increase. Operating income for this segment rose by 3% to JPY 41.5 billion. The company is focusing on expanding its in-house development services, aiming to improve its gross profit margin and build a stronger management base.

Media & EC Business

The Media & EC segment saw a 6% revenue increase to JPY 408.3 billion and a substantial 74% rise in operating income, partially driven by a one-off valuation gain. Excluding this one-time factor, operating income still grew by 20%. The company is committed to enhancing security measures in response to data breach reports and maintaining its competitive position in the market.

Financial Business

The Financial segment posted a significant 20% increase in revenue, reaching JPY 63.1 billion, and achieved an operating income of JPY 5.7 billion. PayPay, a major player in this segment, turned profitable ahead of schedule, contributing JPY 9.3 billion in consolidated EBITDA and showing a 19% revenue increase to JPY 57.2 billion. This marks a pivotal moment for SoftBank as PayPay's profitability is expected to become a major earnings pillar going forward.

AI and Future Investments

SoftBank is making significant strides in building next-generation social infrastructure, including plans to establish AI data centers across Japan. A Memorandum of Understanding (MOU) with Sharp Corporation will facilitate the construction of an AI data center inside Sharp's Sakai plant. To support these initiatives and solidify its financial position, SoftBank plans to issue about JPY 200 billion in Series 2 bond-type class shares.

Guidance and Future Prospects

The company is optimistic about the future, stating that its Medium-term Management Plan is ahead of schedule. With robust performance across all business segments, SoftBank expects continued growth and profitability. The Consumer and Media & EC businesses are delivering strong results, while the Financial business, boosted by PayPay's profitability, is expected to keep contributing significantly. Additionally, SoftBank's investments in AI and next-generation infrastructure position it well for emerging opportunities in the market.

Earnings Call Transcript 2025-Q1

[Unknown Executive]

Thank you so much for waiting. We will now begin the presentation of the earnings results of SoftBank Corp. for the 3 months ended June 30, 2024.

We'd like to introduce today's attendees, SoftBank Corp. President and CEO, Miyakawa; Board Director, Executive Vice President and CFO, Fujihara.

Today's presentation 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, executive]

Hello. This is Miyakawa. Thank you for your attending. So as the first quarter results have been closed, I would like to explain them. Revenue was JPY 1,535.7 billion, up 7%. This is a record high for the first quarter on the stand-alone basis.

By business segment, revenues increased in all businesses. In particular, Enterprise, Distribution and Financial businesses, three of them posted double-digit growth.

Operating income was JPY 303.9 billion, up 23%. Operating income exceeded the level before the impact of price reductions and achieved a record high in the first quarter on a stand-alone basis.

By segment, all of our business segments recorded profit growth. Especially, the Financial business, which had been loss-making since the consolidation of PayPay, has finally become profitable and we have high expectations for this business as a pillar of our earnings going forward.

Net income was JPY 162.5 billion, up 11%.

As you can see in the consolidated results summary here, revenue and operating income were record highs with operating income and net income growing at double-digit rates. Both operating income and net income exceeded 30%. We are pleased with a smoother start to the current fiscal year than we had expected.

The progress rate by segment is as shown here. In addition to the strong performance of the Consumer business and the Media & EC business, the Financial business has already achieved 189% progress with PayPay achieving profitability earlier than expected.

The current Medium-term Management Plan is the second phase of a road map to realize our long-term vision, and thankfully, we are making progress toward all of our goals ahead of schedule.

I will now explain our performance by business segment. First, let's look at the Consumer business. Revenue was JPY 681.7 billion, up 2%. mobile revenue increased by 2% to JPY 7.6 billion. Mobile revenues were able to overcome the impact of price reductions, so sales have continued to increase since the second half of last fiscal year. Operating income was JPY 156.4 billion, up 6%. The number of smartphone subscribers grew at a steady pace with an increase of 4%.

We announced a strategic alliance with Perplexity, a provider of a conversational AI search engine on June 17. So this is an AI search platform with multiple compatible AI models. To give you a taste what an AI search engine is all about, we decided to offer a free 1-year trial of the paid version, which is worth JPY 30,000 per year. The number of searches has grown rapidly by 1,000% in 1 year and we feel that this is one of the ways in which AI will be used in the future.

Next, I'll explain the Enterprise business. Revenue was JPY 215.6 billion, up 10% from the previous year. Revenues of solutions and others were strong with a 27% increase. Operating income was JPY 41.5 billion, up 3%.

The solutions business is growing strongly, and we are determined to focus on its gross profit margin. To achieve this, we are looking to expand our in-house development services. Therefore, we are in the process of rapidly reinforcing the necessary human resources and building systems. We would like to build a stronger management base by absorbing such upfront investments.

Now Media & EC business segment. Revenue was up by 6% to JPY 408.3 billion. Operating income was up by 74%, driven by steady growth of Media and one-off valuation gain. Even excluding this onetime factor, operating income was up 20%.

As the LINE Yahoo management team explained at their earnings announcement, the report on preventative actions against data breach was submitted to MIC on July 1. SoftBank will continue to support them to make sure the security measures are in place.

There was an announcement of TOB to stay traded on prime market and A Holding decided to apply for the TOB. The ratio of voting rights in A Holdings held by NAVER and SoftBank will remain unchanged. As we have been saying, it is hard to come to a conclusion for short term as to the capital structure. We will continue discussion until we make decisions based on future business strategy of NAVER and SoftBank and LINE Yahoo's future.

Next, Finance business. Revenue was up by 20% to JPY 63.1 billion. It posted operating income of JPY 5.7 billion. PayPay finally became profitable, showing a strong improvement. PayPay's consolidated revenue was up by 19% to JPY 57.2 billion. PayPay posted JPY 9.3 billion of consolidated EBITDA, positive for 2 quarters in a row. GMV of SB Payment Service was JPY 2.3 trillion, 21% increase year-on-year.

Next, let me share with you progress around our efforts to build next-generation social infrastructure. As we explained, we plan to build AI data centers in a distributed manner across Japan. We have made progress around building the brain data center. We announced on June 7 that MOU was signed with Sharp Corporation for our construction of AI data center inside Sharp's Sakai plant.

We can take advantage of not only the plant's already available buildings and land, but also power supply and cooling equipment, which are essential for running data centers. It should accelerate construction of our AI data center. We will see how things progress in details and make necessary decisions along the way.

By actively making investments for growth, we aim to become the market leader in the era of generative AI. To solidify our financial position that allows us such investment for growth, we filed with shelf registration for the issuance of Series 2 bond-type class share with a plan to issue about JPY 200 billion.

To summary, we posted record high revenue and operating income for the first quarter, and revenues and profit increased in all segments.

And next, Mobile revenue continued to increase. And PayPay achieved a positive operating income for the first time on a quarterly basis.

Last but not the least, next-generation social infrastructure initiatives are in progress. We continue to strive for Information Revolution - Happiness for everyone.

Thank you very much for your kind focus on my presentation. We will now open it up to a Q&A session.

[Unknown Executive]

We will now open up to Q&A session. We'll take questions first from the floor then from the Zoom media followed by Zoom analysts, institutional investors. [Operator Instructions] Please raise your hand if you have a question.

In the right side of the area, the very front. [ Ono ] from Yomiuri newspapers.

[Unknown Attendee]

This is not related to the earnings results presentation. So the Bank of Japan announced to raise the interest rate. So do you see any impact due to that? And related to that, even to date, the share prices are dipping. So can you share what's your thought on this impact?

The second question is that the other day, Ministry of Internal Affairs and Communications announced the rules related to the NTT Law. So moving forward, there will be the decisions to be made. So do you have any opinions on the further discussion around NTT Law?

[Junichi Miyakawa, executive]

Thank you for your questions. As you said, the share prices are going up and down. So today, so only SoftBank has not been up and I was very disappointed to see the share price chart just before coming here. So I made up my mind to report the first quarter's earnings results here on the stage with my new determination.

So the 0 interest rate is going to end, I was thinking in that way. So our loan has been fixed and -- nearly 90% has been fixed. So even with the interest rate hike, we will have no impact in the short term. However, if it continues for a long period of time, because we have a large amount of liabilities, we may have to review our business strategies.

However, in the meantime, we should be okay. We are under control. And so I cannot tell you the root cause of this share price dip. So this drastic fluctuation so causing a lot of people's confusion. So I wish it wouldn't happen. However, in a small range it's always going up and down. So the trend should be going towards the other way to the certain direction.

So since I took this position as CEO, I was focusing on the actual power to earn -- earnings power, which will lead to the growth of our company in the future. So we would like to continuously pursue.

The second question about the Ministry of Internal Affairs and Communications about -- related to the NTT Law, now they are compiling that. And since this is a very special, unique company holding public asset, so therefore, some special treatment needs to be acquired. So right now, 5G or beyond 5G we are really busy dealing with all these things. So if we had time, spare time, to discuss on such NTT Law matter, we should be focusing on discussing other things for expanding and improving infrastructure for the entire communication network. So the discussion on the ministry is not really to abolish the NTT Law, that's how we see. Of course, we should continue discussions and I would not change my position.

[Unknown Executive]

Any other questions from the floor?

[Unknown Attendee]

[ Matsuda ] from Nikkei Shimbun. One question about the Mobile business. Rakuten has been growing in terms of the subscriber number. What's your view on that?

And SoftBank, you have LINEMO introducing new price plans, so I don't know if you have any plan to compete against Rakuten.

[Junichi Miyakawa, executive]

Thank you for your question. Looking at the Rakuten's move recently, especially the number of subscribers, of course, on daily basis I have an update on MNP between those 4 carriers and also net adds of other carriers. And since the beginning of spring, I feel that Rakuten has been doing very well and I am impressed with Mikitani-san's capability. The founder, like Mikitani-san, should have such a strong potential. And SoftBank went through the same route and journey, and every day and night we tried to figure out how we can grow net adds. And I believe that Mikitani-san has been so focused and put his energy in increasing the net adds.

And do I feel a threat? Yes, I do. Having said that, from SoftBank's perspective, is there any impact on our business? Very few. To be very honest with you, maybe there is a market where I didn't pay attention to and that market is where Rakuten is getting a lot of our customers. So my view is there are a lot of opportunities for anybody to gain business, and I welcome their effort. And hopefully, Rakuten will be the fourth most powerful carrier in Japan. That should lead to a healthy competition in the Japanese market.

About LINEMO's best plan that we announced, we often hear is that the competitive plan against Rakuten, and the answer is yes. And from my experience, unlimited is something that we should be very careful about. But for users who prefer a mid-range of volume as opposed to high data volume, we decided to introduce the plan to gain traction of those users and it's been running well, better than we anticipated. And we are running a lot of advertisements, I think that's one of the reasons why it's been performing well. So that's the current status.

[Unknown Executive]

Thank you so much. Next question from the left side of the floor.

[Unknown Attendee]

[ Nagoshi ] from NHK. I have two questions. First, SoftBank, you had some network failure this month and the last month. Can you tell us the root cause of that? And also this kind of network failure has been happening worldwide. Is it because of the increase of traffic? I would like to hear your opinion.

The second question is about the total energy committee. You've also had the opportunity to mention your opinions and what is your opinions regarding the data center constructions nationwide?

[Junichi Miyakawa, executive]

First about the network failure, we deeply apologize for the inconvenience caused to all the users. There were 3 incidents continuously started on this July 23, 28, and most recently, the 2nd of August. So each one we recovered from the failure. These 3 were not connected in terms of the system. However, telecommunications industry, one failure happens, it leads to one after another.

So there are some causes. The first one in July and the most recent one on the 2nd of August is due to the vault switchers seem to be the problem. However, they were completely different switchers and also in the switchers in MME in the West Japan and so the different causes were discussed. So I think it was due to the summer heat fatigue. So if we had ourselves tightened more, then we could have dealt with this incident much faster. So we were -- we are now reviewing to find out the root cause and make sure that we prevent it from the recurrence.

And about the energy sources, so right now in Japan we do not have sufficient -- or we do not have abundant electric power. However, in this advancement of AI, we cannot avoid facing the vast volume of energy consumption. So when AI is learning, it consumes a lot of energy. Once it goes to the inference phase, it doesn't consume as much. So right now, in the phase of learning.

So we -- now Japan wants to create the sufficient and strong brain as the other countries are doing. So then the even larger energy consumption is expected. So therefore, we would like to construct data centers in the regional areas.

However, the computing infrastructure built overseas. If we are trying to build the same scale as what overseas companies are doing, then we need to secure enough energy sources. So that's why I attended the committee and made my speeches.

Of course, we cannot really [ been opposed ] from here and now on, so we would like to construct the data center in a harmless way. So we are coming up with different ideas so that we can sustain ourselves in terms of energy sources, and AI itself would become national power.

So therefore, if we were to contribute to enhance our power as a nation, then we would like to do so in different ways. So I think there are many different ways by different Japanese companies and we would like to become one of those to contribute to the further enhancement. Thank you.

[Unknown Executive]

Next question from the venue.

[Unknown Attendee]

[ Seki ], freelance writer. I have a question about PayPay. PayPay became profitable earlier than we thought, you mentioned. As you keep saying IPO, I don't know what's your view on PayPay's potential IPO. Now that PayPay became profitable, what are your expectation from PayPay going forward?

[Junichi Miyakawa, executive]

Of course, I expect PayPay to be profitable this fiscal year, but it became profitable earlier than I thought in terms of a quarter. So I am happy. I was hoping PayPay to become -- performing well last half of the fiscal year. But again, they became profitable earlier.

Once PayPay or somebody has a certain amount of users, the company should not lose momentum pretty soon. So I believe that PayPay will play the leading role for us to perform even better and grow even further. And I keep saying that PayPay should not go public until PayPay becomes profitable. And Fujihara-san kept warning me that question about IPO should come once PayPay became profitable.

So again, that's up to PayPay to decide when and how PayPay wants to be in terms of IPO, but I believe there is an opportunity for them to grow further and they don't have to be in a hurry in terms of financing. Once they feel more comfortable about the future, then PayPay might start thinking about IPO more seriously. So we will see how it goes, to be very honest with you.

[Unknown Executive]

Thank you so much. In the center of the floor.

[Unknown Attendee]

I'm [ Asono ], freelancer. Two questions. First, the NTT started new plan, just like to PayPay's Pay-toku plan, and what do you think about that?

And the second is that the churn rate is pretty high in the first quarter, so that is because see the fierce competition of the same contract? What do you see as the cause of the churn rate hike?

[Junichi Miyakawa, executive]

So first question is about poikatsu. So eximo poikatsu of DOCOMO is very similar to Pay-toku unlimited plan. So now we are all in the phase to compete. In terms of expandability of ecosystem of each carrier, so there a certain percentage of PayPay point used to be returned, so that's what we started as Pay-toku.

I have a feeling that Pay-toku is easier to use. So each carrier within their own ecosystem would be providing their plan. So we, at SoftBank, also want to pursue and explore like the second Pay-toku plan.

And the second question is about churn rate. So a certain volume of users would swap in the short term, so that is true. And the layer does not get affected by the different plans. So when we look at a certain layer, which tends to have shorter period of contract and -- but we believe that it does not affect our business result as a whole. So it does not affect in terms of the business figure.

However, structure-wise, some users who make a contract just for same. And after 3, 4 months they cancel the contract and have another contract. So there is a certain number of users like that.

Honestly speaking, we also like to deal with such things. So like the incentives have a certain limit. And what we need to do is that we should stop providing SIM alone. However, it's really challenging for a single carrier to start such initiative. So we would like to see how it goes and then find out a right way and timing to deal with that. Thank you.

[Unknown Executive]

Next question from the venue.

[Unknown Attendee]

[ Ishino ], freelance writer. About Pay-toku you mentioned, looking at the Mobile business, operating income and revenue, you see growth in those areas. So again, that kind of price plan, high-end price plan, how much positive impact that kind of price plan has had on the better performance?

And second, Rakuten's Platinum Band, they launched a Platinum Band-based service. Maybe they had only one cell site that runs on the Platinum Band, so I wonder what's your view on the Rakuten's Platinum Band effort?

[Junichi Miyakawa, executive]

First, Pay-toku's impact on ARPU, is that -- was that the first question? Of course, Pay-toku is a high ARPU service offering and we offer points or loyalty for those users. But still, that's a high ARPU users or high ARPU plan. There are different brands, LINEMO. Our performance is based on the mixture of those offerings. ARPU times the number of users is the source of our revenue. Fixed expense should not be impacted so much with 1 million users more.

We need more users and we need to maintain ARPU, so we have to figure out the best mixture of different offerings, including Y!mobile and Pay-toku. So it's not a Pay-toku stand-alone that has had an impact on ARPU.

The second question is about the Platinum Band. Yes, that's a competitor's effort, so I don't want to make a strong comment. But just one thing, like I keep saying for a long time, as an MNO that it was given a spectrum, which is limited resource by the government. That MNO should be responsible. And at the moment, maybe they have not fulfilled their obligation and responsibility as MNO to fully leverage the spectrum that was given to MNO.

[Unknown Executive]

Any other questions from the floor? From the left side of the venue.

[Unknown Attendee]

[ Sugiyama ] from Nikkei Business. Two questions related to AI. First question, recently Gen-AX led, what sort of potential deals are available right now? The CEO Takahashi of KDDI also mentioned about AI as a new pillar and a major pillar of the business growth. So what do you think about that?

The second question is about what do you think about the risks of AI-related investment? So due to the share prices dipped recently, so your CapEx will be also used for telecommunications area. It's not limited to AI investment, but GPU is extremely expensive. So I believe that majority of the CapEx will be spent for AI-related things. So what do you think about that?

[Junichi Miyakawa, executive]

So the first question is about to Gen-AX. Yes, we have a lot of inquiries. You also mentioned, but yes, there are a number of inquiries around Gen-AX. So now GPT for all is available, which is very similar to human response even more than before, which will be appropriate for call centers. So due to the advent of 4o, it could be used for call centers. There is a number of inquiries related to that.

So our project is also to automate call center. I believe this is one of the most difficult areas. Of course, it is possible to respond. But the content of the response is really important and that is critical. And if the content of the response is too long, the user would cut off the call. And it's very difficult to cut in the conversation or the questions being asked. So it cannot be easily replaced by computers.

How we can make it as close as human being's response, that's what we have been working on seriously. So sometimes there is an incoming call just to let us know that when the payment has been done through ATM. So that kind of things. Internal systems, we do have like 400 different systems and this has to be also linked with all the systems and the backyard system has to be dealt first.

So there are some hurdles to overcome. The corporate manuals have to be first digitalized, then AI can understand. So a digital transformation has to be done first internally, then AI would be fully promoted. So it has to take each step by step. So for that, Gen-AX, so each company's task's to be automated -- or sorry, digitized and that should be the first step. And the annotation will be the next step. So this team is not to build AI algorithm, but this is to support to connect internal tasks and AI.

One more question about the risk of investment and AI-related. I am not certain about that either because I know -- I'm sure that AI is going to be penetrated more and more. So the question is that the direction of AI we are investing on is right or wrong.

So first, data center construction, so the cooling system, rack and all these facilities for a data center, this is not a risk because the volume of AI would be more and more and means that data centers will be in higher competition. So now electricity is in high demand, high competition, so next is data centers. If there was a risk, then GPU performance -- the performance of GPU is advancing really fast. So the GPU chips that we purchased 2 years ago is already obsolete. So when we compete performance with what we purchased 2 years ago with the most recent one by NVIDIA, then it's 10x more in terms of performance of GPU.

So now in the phase of GPU growth and how much investment should be made on GPU, we have to carefully watch the balance between demand and supply of GPU because in only a few years what we have bought now will be obsolete. So we need to see the right direction on which area of AI we are investing on.

[Unknown Executive]

Another question from the floor.

[Unknown Attendee]

[ Sekiguchi from Katai Watch ]. I have 2 questions. First, for the first quarter, Mobile had a 10-year anniversary in the first quarter, so could you let us know the latest number of the users. Like Mobile is affordable and -- while Mobile has been performing well and switching from Y!mobile to SoftBank brand is also going. So I wonder if do you have any plan to stimulate switching from LINEMO or Y!mobile to SoftBank brand?

Second question, looking at KDDI's earnings result, President Takahashi mentioned that on device AI and cloud, hybrid of them would be very important. On device AI is area where chip-makers and the device makers have been focusing on for some time. And on demand -- on device AI or edge AI, do you have any plan with regards to service offering, whether it's for Consumers or Enterprises?

[Junichi Miyakawa, executive]

The first question is about the number of users of Y!mobile, is it disclosable or not? Fujihara-san?

[Kazuhiko Fujihara, executive]

About 12 million.

[Junichi Miyakawa, executive]

12 million, just roughly. I will follow up. Again, 10-year anniversary, Y!mobile and Willcom were merged, and they have been growing since. In the same network, there is a SoftBank brand and a Y!mobile brand and they are using the same network resources, but they have different price plans. So we try to identify differentiation between Y!mobile and SoftBank. And Y!mobile brand and SoftBank brand, we have been focusing both in the last 10 years to figure out the best way for those 2 brands and their positioning.

For Y!mobile, the target users are low -- mid-ARPU users. So for high-ARPU users, that's a SoftBank brand. So the volume that we offer or service content that we offer are something that we use as a differentiation.

From Y!mobile to SoftBank, and vice versa, from SoftBank to Y!mobile, like in-house MNP, if you will, is happening -- has been happening. And in the last quarter, it was about half and half. Of course, it depends on quarterly -- quarter by quarter, but for the first quarter, it was almost half and half.

So SoftBank has been solidifying its position. So it takes 10 years, but we have been handling different brands better than before. And now we have PayPay and LINE, different brands in our group, and we are trying to develop products and services by utilizing those different brands. So next 10 years will be easier for us to come up with new plans.

In the cloud, AI is generated in the cloud, that's the traditional AI. But also AI will be implemented in the edge like devices. Like, for example, Samsung's smartphones have implemented AI. And maybe, of course, AI will be implemented in cars and also our consumer electronics. So on the more and more edge side, AI will be incorporated to make people's life even better.

What I want to do is as follows. So I casually mentioned that I wanted to build AI smartphone, that was my first personal thought. But I want to build a vertical AI platform. So we have been building data centers and we want to have cell sites powered by AI. So we are looking at AI-RAN to design, AI-RAN and cell site powered by AI. And then we can build a vertical integration from cloud to edge, that will be our unique position in terms of AI offering different from GAFA. So from edge to core, even to build AI and implement AI in different areas, that's our strategy.

[Unknown Attendee]

Thank you for your answer. You mentioned from edge core. Edge, you are talking about edge devices included?

[Junichi Miyakawa, executive]

Yes.

[Unknown Executive]

Thank you so much. Due to the interest of time, we would like to take questions from 2 more persons from the floor.

[Unknown Attendee]

[ Nagata ] from Nikkei xTECH. In April, a Thuraya incident -- related to the Thuraya incident happened in April this year. So why at the end of this month, why you are going to stop that service? Related to some warranty to the users, so what will be the impact to your business?

[Junichi Miyakawa, executive]

Yes, we need to, first of all, apologize to the users due to the Thuraya satellite failure. So it's not only linked down, there are some Thuraya satellites and above Japan is the communication satellite and it -- that communication was cut. So the Thuraya told us to wait for a little longer so that they would fix the issue. So there may be some cases that sometimes [ pass and not ]. So we could not continue discussions. Therefore, we decided to stop providing the service any longer. So the monthly fee and also the discount rate and all these things, we have been working around that.

So as of end of August, why we decided to do so at this timing is that we wanted to reset this and so that we could provide something in a different manner. So the satellite failure is happening far and 36,000 kilometers far, so which we sometimes have no control over it, but we sincerely apologize for the inconvenience caused to the users.

So I believe that this was very helpful to the Noto Peninsula earthquake. This was not used by the Ministry of Internal Affairs and Communications. Yes, but in case of natural disasters, yes, we lend it out in case of the natural disasters. But I believe that we have done so, but we are looking for alternatives.

[Unknown Executive]

So we'd like to take the last person for questions.

[Unknown Attendee]

[ Ishikawa ], freelance writer again. Sharp Sakai plant is going to be utilized for your data center. At the same timing, KDDI made a similar announcement. What's the difference between KDDI plan and your plan?

The next SoftBank network is highly recognized by Opensignal, but also KDDI Sub6 -- KDDI announced to use Sub6 to make it 2 blocks for speeding up. So I wonder what's your plan on that?

[Junichi Miyakawa, executive]

About the Sakai's data center. I was actually surprised. Actually, sometime around January, we wanted to kick off to make a data center into AI data center. We started a study in January and March we made a preliminary agreement. We signed a nonbinding preliminary agreement in March and we had continued discussion. And then before we knew it, KDDI made an announcement. And we called Sharp immediately and started a discussion with Sharp again and we switched from nonbinding to binding agreement before we made an announcement.

The Sakai plant is a vast land and LCD plant was a plant that we wanted to take advantage of. They've got vast land and big buildings, and KDDI utilized the other buildings and other pieces of the land. And maybe many carriers will start building in Sakai pant. And Sakai site can be concentrated data centers for carriers. And it seems that Sharp -- we are checking with Sharp and others if we could continuously utilizing their resources, and we will figure out the best decision based upon that study.

Then next question is about network connectivity. We ran a very impactful advertisement, as you may know. And our sales team suggested such a provocative advertisement and I gave green light to them. We have plenty of the sites. Capacity-wise, in Tokyo, it's been helping us, so we don't suffer from the lack of capacity. So that's why we can offer or deliver good coverage and capacity, which is highly appreciated, I believe.

But when a killer app is launched or when a new use case emerges, then not only downlink, but also uplink capacity may be needed going forward. Maybe in the future, we may need more capacity for uplink than the downlink, then we may need to review the network design.

So at the moment, we are enjoying a great review. But we are not complacent and we stay vigilant. And whatever KDDI tries to do for you -- their better performance, we want to learn from them. And likewise, DOCOMO and NTT we want to learn from them. And I think a healthy competition is good for all of us. So we want to proudly compete in such a competitive market.

[Unknown Executive]

Thank you so much. Now we would like to take questions from Zoom analysts and institutional investors. [Operator Instructions].

[Operator]

Masuno-san from Nomura Securities.

[Daisaku Masuno, analyst]

This is Masuno. I have 2 questions. One is about PayPay. So the JPY 10 billion of operating income was what we predicted this year, so it's coming closer. In the next 5 years, I believe that JPY 10 billion of operating income will be possible for achieving. When the PayPay had a remeasurement, so I believe that adjusted their earnings, PayPay could achieve JPY 10 billion of operating income. But what is your expectation on that?

[Junichi Miyakawa, executive]

Let me answer one by one. Thank you so much for your question, Masuno-san. So this fiscal year, so JPY 10 billion, but I also believe that only PayPay payment transactions business I think it could achieve JPY 10 billion -- close to JPY 10 billion or so with payment transaction business alone.

But as you mentioned, our payment business, the companies which are doing only payment business, their market capitalization is going down. So that's why we need to leverage our strong customer foundation to strengthen our business foundation. So different kinds of businesses will be accumulated so that we could achieve some JPY 10 billion scale of business. So to that, we would like to nurture this business.

[Daisaku Masuno, analyst]

My second question is about AI-related investments. So this time, JPY 43 billion of operating income is added, which was not included in the initial forecast. So by accelerating the AI investment, I think it's still operationable. So JPY 43.9 billion of investments and if you multiply by 3x or 4x, how fast you are thinking about doing this growth investment? Is it only for growth investment or -- so you are making investments and getting some burden on at this moment? So you cannot keep just loss-making?

[Junichi Miyakawa, executive]

So originally, under others category, mostly R&D cost is it. On top of the R&D, investment on AI infrastructures, so total about JPY 60 billion we wanted to do so. Whether we are going to consume all or not, we may not consume all as we see the result of first quarter. But we see that we would be consuming close to JPY 60 billion, so it actually depends on what we would do with the Sakai data center. So it would be close to JPY 60 billion. It depends when we would start the construction of Sakai data center.

And we are not saying that we would like to keep loss-making by doing this spending on CapEx. But if we spend more on the investment related to AI, then it would be profitable in the near future. Thank you so much for your questions.

[Unknown Executive]

And any more questions from Zoom participants. [Operator Instructions] If not, that concludes question-and-answer session.

Thank you very much for joining the earning results for the 3 months ended June 30, 2024, announcement by the SoftBank.

This session will be available on demand on our corporate website. Again, thank you very much for joining us, our earnings results announcement for the 3 months ended June 30, 2024. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]