SoftBank Corp

TSE:9434

Earnings Call Transcript 2021-Q2

[Unknown Executive]

Ladies and gentlemen, thank you very much for waiting. We would like to start the briefing session of SoftBank Corporation's Consolidated Results for Second Quarter of Fiscal Year 2020. I would like to introduce to you the attendees to this briefing: President and CEO of SoftBank, Miyauchi; Representative Director and CTO, Miyakawa; Board Director, Executive Vice President and CFO, Fujihara.

The briefing session is streamed live on the Internet. Thank you for your understanding. President Miyauchi will be giving you the results of the performance as well as overview of the business.

[Ken Miyauchi, executive]

Thank you very much for coming to this briefing session out of your busy schedules this afternoon. On the Internet, there are many people viewing the session live, and I would like to thank this opportunity to speak in front of you. I would like to start my presentation.

In September, there was something that we have conducted. So before conducting the presentation of the performance results, our parent company, SoftBank Group Corporation, sold JPY 1 billion of our shares. I would like to give you what has happened. The total amount of the public offering was JPY 1.2 trillion. As you can see on this graph, this amount was as big as that of Japan Post or NTT, and it was the largest public offering since 2000, excluding the privatization projects. I feel like I have been through 2 IPOs. I have met many analysts, including the analysts from overseas, both from U.S., Europe and Asia. So I went through the roadshows of the explanation, and I think it was a very good experience for me to experience this twice.

And now the number of shareholders is now 910,000. So we have top -- almost top number of shareholders in Japan. As a public company, I feel that we have huge responsibility. And also, I feel very happy that this many people have bought our shares. The structure of our shareholders, the shareholder composition, as you can see on this slide, it has changed drastically. Before this public offering, SoftBank Group has 62%, and now that ratio has come down to 40.2%. And now we have more general shareholders, including institutional shareholders as well as the individual shareholders. So out of the 90 -- out of the 59.8%, nearly half of the general shareholders are individual investors.

It has been almost 2 years since our IPO. In the past 2 years, what kind of activities have we conducted? And how have we grown SoftBank? And I would like to explain, first of all, how we have been able to work towards stability of our company. As a mobile communications company, as a mobile carrier, we still have that business at the center. However, the business has become more diversified in the past 2 years.

As you can see on this page, in December of 2018, 2 years ago, we had our IPO. Following year, in June, we made Z Holdings, which was called Yahoo back then, our subsidiary. Z Holdings is #1 in the number of Internet users. In November of the same year, we made ZOZO our subsidiary, and we were able to have the #1 fashion e-commerce company in our group. In December, we announced business integration between Z Holdings and LINE. And in March of next year, it will be a full-scale integration. LINE is #1 messaging app.

In July 2020, PayPay. Well, PayPay had been established right before the -- it's founding, but the PayPay users exceeded 30 million, and it's a #1 company in the QR code payment. At the time of IPO, we have said that our aim is to go Beyond Carrier. We have been going step-by-step to realize our goal. Revenue has been diversified also. Company needs to have balanced revenue source. If we have major source of revenue when situation like COVID occurs, that may negatively impact the company like us. So as a company who has as many shareholders like our company, we need to have a growth from balanced sources of revenue.

After October of last year, we have unbundled the handset and the telecommunications charge. The mobile end consumers that has been broken down, and the mobile communication charge and the broadband, the securities services, everything was broken down. And mobile communications charge revenue of what was 38% back in 2017 became 29%. This means that we have 71% of revenue coming from other than mobile communications charge.

From the operating income perspective, in fiscal year 2017, 44% came from mobile communications charge profit. But in fiscal year 2019, it's 38%. Now we have Yahoo under our umbrella and Enterprise business is growing. And consumer service business is growing very steadily. And the mobile communications is, of course, growing, but our overall business is growing, and there has been diversification of the sources of profit. That has happened in the past 2 years. As a result, SoftBank Corporation, at the time of IPO, we had a mobile fixed line, Enterprise and Distribution as part of our business segments. And now we have, as a company, aggregation of leading ICT players. We have e-commerce, payment, various other businesses. We did not have this middle line. But at the time of IPO, we had blue and green lines, and I have said that we will implement Beyond Carrier strategy. I have set that in front of you, and I have declared that in front of my shareholders. I remember saying this.

While growing telecom business steadily, we are working on to significantly grow the over-the-top portion. In addition to that, we have new fields like PayPay or other joint ventures, and we have created new businesses. We are able to serve consumers and enterprises better through this. And in the world of ESGs or SDGs, we will be able to contribute to it more in the future. We have transformed ourselves to be able to contribute more into these new fields.

Now I would like to talk to you about the earning results for the 6 months ended September 30, 2020. The revenue was JPY 2.428 trillion. We were able to increase the total revenue, even though we had COVID-19 impact.

If we look at the revenue by segment, Yahoo and Enterprise grew steadily. Consumer segment declined slightly, but this was because of the decrease in the handset sales, which were impacted negatively by COVID-19. However, overall, we have been able to grow our business.

In terms of operating income, we were able to robustly grow. It was up 7%. We were able to increase both revenue and profit.

If we look segment-by-segment in operating income, as you can see, Yahoo and Enterprise was able to grow 20% to 30%. Yahoo grew 30%, and Enterprise grew 18%.

As I have said at the beginning, the businesses that we have are diversifying. And through this diversification, we are able to respond to crisis like COVID-19. And even amid the crisis, we are able to record increase in both revenue and profit.

As for the net income, it had gone down slightly. But in the full year, we expect that net income will surpass our expectations. So I have developed this chart, so that I can explain to this more in detail. So in terms of operating income, as you can see, compared to last year, we have increased by JPY 37.6 billion. But if you look at financing income and costs, we had onetime factor. Last year, we had gains on sales of equity method investments, and we have losses on valuation of financial assets in the current fiscal year, so that's minus JPY 19.29 billion. And of course, because of increase in taxes, we had income taxes, as you can see. And we have some impacts from our subsidiaries, such as ZOZO consolidation. So first half was slightly down on a net income level. But on a full year basis, there's no doubt that we will be able to increase both revenue and income.

So if you summarize this in a table, as you can see, first half revenue was JPY 2,373.1 billion. That's plus JPY 55.3 billion year-on-year and plus 2% year-on-year. Operating income, as you can see, plus JPY 37.6 billion and plus 7%, respectively.

Now if you look at this on a progress on a full year basis, if you look at full year, our target was JPY 4.9 trillion. So we are now in terms of operating income, progress is 64%. So in that sense, you can say that we can steadily achieve our number that we have committed to. In net income basis is 65% because it was very high last year. Slightly down this year, but you can see that we are heading towards increasing revenue and profit on a full year basis.

So let me take some time to explain about our growth strategy, non-telecom expansion and solid telecom growth. As I said at the outset, these are the 2 topics I want to talk to you about today. So let's look at the Enterprise business. As for Enterprise business, I have been asked by many analysts during the roadshow. This is a business that's growing very nicely right now. And as you can see, we originally started with fixed line, Japan Telecom, and we had added mobile business. And now we have solutions business, and we are seeing significant increase in business solutions business. So this is up 7% in revenue, in particular, driven by business solutions and others by 17%. So you can see a very nice increase in overall revenue.

And as for operating income, as you can see from this graph, in particular, this is something I mentioned last time. But in April, we had great concerns about the future. But as it turned out, there's a little bit of slowness in April. But in May and June and, in particular, July and August and September, we have seen explosive growth of telework demand. And as a result, we have been able to increase by 18% on operating income basis.

And if you look at this, you can see that cloud services has done well. If you wanted to do remote work, you need to put all your information into cloud. So cloud service is an area we have always been focusing on from before, but we have been able to grow by 1.4x in 1 year. And IoT is finally starting to move. And I think next year, we should be able to provide you with more information, but it has grown by 2.9x in 1 year. In security, it has really gained momentum. And as we see shift in digital, we believe that this growth rate will accelerate. So last year, in 1 year, we have grown by 2.2x. So digitization demand is increasing, and we're benefiting from that.

And if you look at our revenue growth for the Enterprise business, we have been able to maintain double-digit growth. And this is a world in which we will be able to grow significantly. I will talk about this more. But once 5G becomes full scale, then if the nation -- this 5G is used nationwide, then there's a great opportunity for us. In 2030, we believe that the market in Japan will be about JPY 50 trillion in just for 5G devices. And again, this is based on different surveys and research companies' results, but that's the momentum we're seeing, and that's how much we have potential for growth.

In particular, as I said, April, we were wondering what will happen to us in the future. Usually, Enterprise sales -- in particular, our company's Enterprise sales are basically marketing towards companies, enterprises, customers, and we're not able to visit them face-to-face. But within -- in this 6 months, we have been able to realize hybrid sales, combining both online and off-line sales and marketing. In fact, we have identified that there's more effectiveness in online sales. April, May, we were not sure if we can develop new customers. We need to -- can we continue to visit our existing customers, but we are offering network and data center and cloud services. So we were really questioning whether we can actually do this. But even e-mail marketing, we used webinars. We have shifted from conventional to online. Negotiations face-to-face now has shifted to Zoom, online negotiations, contract signing. This has become more digital e-signing. So on-site support, as well. So actual installation and providing network has to be done on-site, but all the supports can be done on Zoom.

So if you look at Q2 alone, the number of contacts with customers, we have about 3,000 sales force in our company, and they have been calling up customers. They have visited customers face-to-face. By leveraging online, we have been able to actually increase the customer contacts by 5x. This is a fact. What we have done ourselves, I think, we can actually market to other customers enterprises as well. Because of coronavirus, we had many challenges, and I know that we will continue to face some challenges. But now we see a big sudden shift to digital, and customers are very much shifting to digital as well. And customer contacts will be done on Internet. This is a very normal now -- it's a new normal.

And I have always talked about 3 major digital revolutions. One is digital communication revolution. It has already taken place completely. Even in this setting today, even in earnings results briefing like this, we have people who are here physically, but we also have people who are watching this remotely. We're not constrained by time and place. So that we can use smartphones, tablets and use cloud computing, Zoom to enhance digital communications.

Secondly, this is something is yet to come, but will come in full scale, digital automation. It could be AI, RPA, Big Data, IoT. We will analyze the data, and we can automate all the work processes, and there will be many areas which you can automate. And with the power of 5G, all the processes of different companies around Japan can be automated in this digital automation.

And thirdly, this is not just for big companies but for SMEs and even mama and papa shops. We will come and face this age of digital marketing. You will contact customers, you will marketing, carry out sales using data. You can do sales lead through webinars. This is the world that is -- will be coming for sure.

The other day, we held SoftBank World 2020. You can see the conversation between Mr. Son and Jensen was very much interesting. And I did not think that all these great people will be coming together. And it would not have been possible if it was physical. We were able to do this because this was online. And not -- we have been doing this every year at [ France ] hotel in [ Shiba ]. But if we did this physically, people at this level will not be able to gather in 1 place. But these are the CEOs from world-leading companies who came together online. We had no physical participants. It was all done remotely. But as a result, total number of registers haven't really changed that much year-on-year. But if you look at the actual total viewers, it's actually 3x last year. The total viewers was normalized at 119,000. And if you look at lectures viewed per person, and we have the digital data, so we know exactly who looked at it, and we know who blocked it in between. So in the past lectures, people will participate. And we have the participants list. But if they left, in a way, we would never know. But because this is digital event, we would know lectures viewed per person, average 4.0, and we have many more data, detailed data. But we have many people viewing this. And this is a great opportunity for us to introduce our services to those people who have viewed this and who have shown interest. So whether it be Enterprise business or other business segments, remote marketing and sales has proven to be given us an upside. And we have been able to really understand and experience that through SoftBank World 2020.

So Enterprise growth strategy, we have our 4 service bases for the digital revolution, which we'll continue to reinforce. One is digital communication. We are partnering with many companies from the West, Slack, Zoom. We're using Slack all the time in the house. And we're using Microsoft Teams. We also work with Google, LINE WORKS. We are basically using them like an ecosystem.

And in the area of digital marketing, we're using like Adobe Analytics, which really allow us to enhance on sales activities. We can drive sales lead that's interested in us. It's not just volume, but we are able to identify who is interested in what. And we can understand that using this Adobe system, and we have location data from Cinarra. These are the things we're leveraging, so that we can do digital marketing and selling.

And finally, we have digital automation base. As a simple example, I can give you an example from AI camera. Just adding AI camera will change everything. Our new office will have more than 1,000 AI cameras and AI sensors. So during your lunchtime, you will be able to know the congestion right away. You don't have to go and see the restaurant to see if it's congested, there's a line or not. So a simple thing like that actually can be multiplied.

And the most important in the fourth area is security base. So I hope you have put in expectations for growth in the Enterprise business.

So let's look at Yahoo. Mr. Kawabe explained in detail in the earnings results briefing of Yahoo, the other day. So we are working together. They are subsidiary now, and they have been growing very nicely. In particular, in first half, advertisement revenue was expected to fall and be in a difficult situation. But actually, they ended up actually growing by 15% and up 30% in operating income. And of course, this is excluding the effect from ZOZO consolidation, much more if you include it. And in particular, e-commerce. This is the area where we would be growing, ZOZO, ASKUL, Yahoo! Shopping, PayPay Mall. We would be expanding our business in these areas. And there was increase in the demand from COVID, but we were able to grow steadily with our growth being up 26%.

Mr. Kawabe has talked about this. But in the second half, we will be focusing on the investment in commerce. Yahoo wanted to become #1 in the e-commerce transaction. So in this area, investment will be enhanced, so that the share can be increased further. I believe Mr. Kawabe already explained this to you.

In terms of advertising, well, in -- because of COVID-19, the tourism demand was coming down. And we considered various contingency plans. And through our initiatives, we were able to go above the previous year. In the first quarter, it had dropped, but in the second quarter, it had recovered.

Media sales -- there has been media synergy with SoftBank. We started our initiatives in the second half of last year, and it was JPY 4.4 billion. And in the first half, it was JPY 6.8 billion. In the second half, I think that we can expect high figures. The sales team is being strengthened, and they have started their initiatives. So that's the current situation.

Next, I would like to talk about PayPay, which is a smartphone payment service. It has been 2 years since this service started. And in October of 2020, after 2 years of service, we have been able to see number of users exceeding 33 million people. In such a short period of time, we were able to grow significantly. This is the biggest growth that we have seen.

In terms of number of payments, it has increased by 5x or 4.9x in just 1 year. There are many people who utilize this service. We enable the use of PayPay in various parts of Japan. More than 2 million stores enable the use of PayPay. So the execution is being done very well in PayPay. Everyone is frequently using PayPay services.

I have shown you this chart before. This is the overview of PayPay service. Going forward, there would be more business synergies. We will -- we have 2.6 million in merchants. The recognition is quite high. You can use PayPay everywhere. You see the sign which says you can use PayPay in our shops in various places. Going forward, we would like to go into financial service in addition to the payment services, and we would like to become super app encompassing, in addition to that, e-commerce and mobile.

PayPay and commerce and mobile. We are conducting loyalty programs to strengthen synergies within our group. PayPay is a universal service. Everyone can use it. On the other hand, it can be linked to Yahoo ID, and also utilization of Yahoo e-commerce or use of credit card or the user benefits of the premium services of Yahoo! Japan. If it's used in conjunction with the PayPay service, you would be able to get back 20% maximum.

Also, Japan Net Bank, which will change its name to PayPay Bank very soon. Balance charging and linking of the balances, borrowing money, this can be done through PayPay, and this service will be enhanced going forward. Through this initiative in the past 2 years, the Japan Net Bank has seen increase in the number of accounts by 1.7x. Also, corporate accounts grew by 4.4x. This shows the power of super app.

Next is One Tap BUY. This is a joint venture with SoftBank and Mizuho Bank. You cannot buy stocks using this yet, but we started out with investing using bonus. So the bonus received by using PayPay services can be used for investment. I use this service also, and we were able to see very surprising figure. In just 90 days, 1 million people utilized this service. Currently, number of users is 1.6 million. Most of them are less than 30 years of age, and they are using PayPay bonus for investment purposes. So this is kind of like a pilot project, but we have started this initiative. So when One Tap BUY becomes PayPay securities, this pilot will be something that would be of use. I think Mr. Nakayama will be making some kind of announcement about this in the near future.

We would like to expand the PayPay ecosystem. We would like to expand our scope of our customers. And we would like to expand our service for the creation of financial ecosystem. We would like to work together with Z Holdings and PayPay, and we would like to grow together.

I talked about non-telecom expansion. And now I would like to talk about the growth of the telecom business, which is also quite solid. Consumer business, in terms of handset sales, that had slightly come down. Slightly. Mobile, broadband, electricity, those service sales had increased. The operating income has been performing steadily also. We decided to categorize this more in details. The pure mobile communications business. So there has been complete unbundling in the communication charge and handsets starting from last year. From that perspective, within Consumer business, how does it look like if it's broken down? The mobile communication charge and mobile value added, which includes -- and also electricity, broadband, sales of good and other -- goods and others, we have broken it down so that there is clarity. And operating income has also been broken down. And there is a big fuss about having the price decrease, and mass media report about this.

So naturally, business exists because of customers. So their trust, their confidence is important, and we need to provide services that would satisfy the customers, and that's true with mobile communication charges as well. So overall, this segment is actually increasing revenue and profit. But if you look at mobile communication charge alone, you can see that operating income has decreased from 56% to 38%. Since I have become the President, it has been trending in that direction. So you can see that the portion of non-telecom business, like Yahoo, Consumer business are increasing. In that sense, no matter what happens, we can continue to grow our revenue, our businesses in a steady manner. That's what I wanted to say here.

And now we have been focusing on large-capacity price plan evolution to lower the mobile prices. Up until 2015, we have White Plan, which is only 7 gigs. And we had 20 gigs for Giga Monster, and we have Ultra Giga Monster, which is 50. And our users are using our network traffic. Our network users are heavy users. They are watching a lot of movies and social media. So we have many users who are using this unlimited service. But of course, there are months, which they don't use, which they said was a little too expensive on the month that they don't use. So we have decided to introduce Merihari Plan, which we apply discount on monthly on the month we don't use.

So if you look at price rate per gigabyte, we were charging more than JPY 1,000 if it exceeded 7 gigs. That was the plan back then. But compared to 5 years ago, our price per -- rate per gigabyte has been reduced by 80% or more. And of course, eligible services has unlimited video and Internet is included as well.

But we are implementing multi-brand strategy, Y!mobile, started 5 years ago. This is for medium capacity, low price. And then we have started LINE MOBILE also about 5 years ago or so, 4 years ago. And so we have these 3 different brands. Some people say we should simplify our brand. But customers want choice, we thought. So that is why we have 3 different brands, modern brands.

And as we have announced, we have announced this new low-price, high-capacity data plan, large capacity 20 gigs monthly, JPY 4,480. This includes voice calls as well. It's very simple, under Y!mobile brand. So we have between low capacity to large capacity. This is what it would look like. So 3 gig is JPY 2,505; 10 gig, JPY 3,500; 20 gig, JPY 4,480. And if it's 50 gig or more, it's JPY 8,000. But on average, it's only about JPY 6,400. So in this sense, 20-gig plan is a simple plan. So you have the mid-price range plan, which I think is beneficial for the customers. I truly believe that we have benefited the customers.

And at the same time, last year, we have decided that we will make cancellation fee 0. And by 2021 spring, MNP transfer out fees will also be 0. So we want this telecom industry, the service to be easy and convenient for the customers.

So in that sense, average price per subscriber has decreased as well. This is a very nice, clear, simple picture. Before it was linked to handsets. But if you think about it before discount, ARPU discount, it was JPY 5,720. Now ARPU before discount is JPY 4,750, which is down by JPY 1,000. We have implemented Y!mobile from early stage. This was low-priced brand. And as a result, we have been able to achieve this.

Meanwhile, what I want to say is that is it just Y!mobile that has grown? No. SoftBank brand is also growing steadily. LINE MOBILE is also growing. In the past, there was a slight cannibalization. But today, among 3,000 shops, outlets, I would say 60% to 70% of the shops, or 1,700 shops are handling multiple brands. So Y!mobile has grown by 5x in 5 years. But total, it has also grown by 1.5x in 5 years. And so each year, we have been increasing by 2 million or so.

So if you look at mobile communication charge revenue, it has gone down in the 3 years, from 2015, because of lower prices. Meanwhile, there's a temporary decline in revenue. But because -- if there's an increase in volume because it's volume times ARPU, subscriber times ARPU, so we can continue to grow nicely if we can increase subscriber. So with 20-gig plan, there's a concern that this will cause decline in revenue. But I believe that it's subscriber times -- if we can increase the number of subscribers, then we can actually drive revenue growth as well. So that's the math we're working with.

And if you look at smartphone cumulative subscribers, we want to achieve 30 million by 2023 target, but I think we can actually accelerate that perhaps.

And let's look at next-generation network development. We have Mr. Miyakawa with us today. And we were on the front page of the newspaper this morning. So perhaps you may have questions about this. So the media always say that it's an oligopoly of 3 carriers. And I might be in trouble if I say we're not an oligopoly. But I think that, just until the other day, we were loss-making company. SBKK was a loss maker. In 2005, during the time of Vodafone, our operating income was JPY 71.8 billion, which is only 1/10 of the competitor at that time. I don't want to give the competitor's numbers. But last year, we have been able to achieve JPY 911 billion. We had many, many efforts. And within this 15 years or 10 years, we have spent -- 14 years, we have spent JPY 5 trillion in CapEx.

And we, of course, made efforts to reduce cost as well. So our focus is basically invest CapEx and make sure that the environment for the customers is friendly. And as a result, we have been able to win this appraisal. We have been able to receive the world's highest level of quality in base station locations. So we're #1 in voice app experience. We're #1 in Japan, of course. And in video experience, we're #3 in the world. We're #1 in Japan. This is -- we have been able to realize world's highest level of quality.

And if you look at base station locations. In base station, if you put 3 in 1 location, that will be counted as 3 base stations, but we are counting this as locations. So we're #1 in terms of locations. So in 5G strategy, we're positioned very well.

We plan to invest in 5G and 6G an amount of JPY 2.2 trillion over 10 years. In particular, 5G devices, this is important for the consumers. But of course, enterprise is important, too. If 5G is to be developed nationwide and if it's to connect around the nation, then from corporate to local municipalities to plants and distribution, they can realize digital shift in true sense. And that's our larger aim. And we have been successful in experiencing HAPSMobile.

We will have airborne base stations and fill in all service area gaps. So we have ultra-high speed, large capacity, mass machine connections, ultra-low latency. In particular, these 2 are extremely important. Once you can realize this, then we can actually complete -- or realize automated driving or smart selling. So 5G is core, is the key, and we're proud to be able to build this infrastructure. So based on this, how do we draw our growth strategy? And I think that's the most important point for us.

So our revenue, we aim for JPY 5.5 trillion; operating income, JPY 1 trillion; net income, JPY 530 billion in FY 2022, if not earlier. This is what we would like to achieve.

And whatever I commit to, I know that I can achieve it, and our shareholder return policy will remain unchanged. There will be no dividend reduction. Total shareholder return ratio will be around 85%. This will be maintained.

So the environment in first half has been extremely difficult, but information revolution has accelerated. It's speeding up and from business format to the way we work have been transformed. And this is something that we can actually sell and market to other companies and local government.

So that is all from me. Thank you very much for listening.

[Unknown Executive]

Thank you very much. [Operator Instructions] In order to smoothly conduct the Q&A session, we will take the question from the venue first, and then we will move on to take the questions on the Zoom. [Operator Instructions] In the central block, the attendee seated at the very front on the left-hand side.

[Unknown Attendee]

My name is [ Ishikawa ]. I'm a freelancer. MIC has announced the action plan. ESIM, et cetera, was announced. So if you could comment on that, I would appreciate it. And also, NTT will be making NTT Docomo a complete subsidiary, 100% subsidiary, and if you could comment on that, I would appreciate it.

[Ken Miyauchi, executive]

MIC has announced a guideline. eSIM, eKYC guideline was announced, and we would be proactively be working on that. eKYC had already been begun in September in Y!mobile. Also in PayPay, eKYC must be implemented, so that initiative had already started in PayPay. As you know, there was a person who had 10,000 SIMs at their home and conducted fraudulent acts. So for the voice, it has been strictly regulated, and individual authentication was made. However, for data, that authentication was not made. So for eSIM, we will be working on that proactively. But for eKYC, we need to link it. We need to link the eSIM to eKYC. And if we don't do that, it would be risky. So in expanding our business, I think that utilizing this new methodology is critical.

And to your second question about NTT making NTT Docomo 100% subsidiary. So NTT Docomo will become a subsidiary of NTT, 100% subsidiary, and I was very surprised. 28 years ago, there was privatization, and there was separation from the parent company. From that perspective, whether it would be the best way to have the 100% -- having NTT and having 100% share, I think that there is a question -- there would be a question arising. So we need to state our opinions about what should be done within this month. I am serving as the Chairperson of the Telecommunications Business Association, and there are many people who are stating the opinions about this as members. So we need to pose a question of whether this initiative by NTT may distort the competition. I think that public opinions must be sought.

[Unknown Executive]

Then the next question will be the person next to the first questioner.

[Unknown Attendee]

[ Ishino ]. I'm a freelance writer. Earlier, you talked about 20-gig plan of Y!mobile, and you talked about some may be migrating to that plan. As a result of 20-gig plan, it seems as though there isn't much difference between 50-gig plan anymore. Do you think that 50-gig plan, like SoftBank plan, may go for even a larger-capacity plan? How would you differentiate the two?

[Ken Miyauchi, executive]

Well, if you think about it, 20-gig plan was actually a missing area. We filled in the gap. We're not quite sure yet how that will be received by the customers. I think we will start at the end of December. We will start very quickly, but it hasn't started yet. My thinking is which would fit the customer the most. We have Merihari Plan. It's actually quite popular. When we've done user survey, more than 85% are satisfied, but there are people who are not satisfied as well. So maybe they might migrate. But I think that's okay if something like that happens.

We have -- we make those assumptions when we develop our business plan. What's important is we -- a private sector company, we are doing our business in this competitive environment. And what's most important is that we increase customers. So if 20-gig plan by Y!mobile can increase subscribers, then that will be a very happy situation for us. That's what I think.

[Unknown Attendee]

And I have my second question. The other day, iPhone 12 was launched, and there was a Pixel as well. What's the growth of 5G subscribers? How much iPhone launch drove the growth of subscription?

[Ken Miyauchi, executive]

Actually, I think I said that there will be a 5G festival at the end of fall, and there was an article about it. But there's 6 models by November, and by middle of November, I think it was 13th, I think there will be more 2 models. And iPhone is powerful. Google is doing well, too, and Pixel as well. But I think iPhone has great momentum. In that sense, I think they might go with mini as well. But they have 4 models that you can use 5G, suddenly available to you. And I'm using iPhone 12 Pro. And sometimes, I see this 5G antenna. But unfortunately, the network of 5G is still limited. I think by next March, I think, you will see a nice overlay of network. But I think right now, it's pinpoint. So if we go at this stage, I think 5G will begin to penetrate well -- nicely. Maybe springtime, it will be a pilot implementation. So now while we have iPhone and Android handsets, we're beginning to see lower-end models as well. And iPhone, if you go from Mini to Max, you have mid-, low to high end. You have 4 different models. So I believe that this will penetrate really well in the future.

[Unknown Executive]

We will move on to the next question. The person sitting in the very left in the central block, in the middle row.

[Unknown Attendee]

From Nikkei Shimbun newspaper, my name is [ Noguchi ]. I have 2 questions. The first question. On 28th of October, about the new price plan, you said that you would be launching this at the end of December. I don't think it would be giving much impact to this fiscal year. But I would like to know what kind of impact there will be. I think that the user transition will occur next fiscal year. And on a full year basis, what would be the impact of bringing down the ARPU? And I would like to know the ratio of the users. That's my first question.

[Ken Miyauchi, executive]

We don't know the details yet, frankly speaking. However, what I have been saying is that in simple 20 plan, if you move from Merihari Plan, ARPU-wise, it would have a negative impact. On the other hand, we have been growing the number of subscription. And when we launched Y!mobile, people have said that if Y!mobile is launched, the company performance will probably deteriorate. But as a result, if we look back in the past 5 years, by increasing the number of subscription, though the ARPU had gone down by 1,000, we were able to increase the profit because the subscribers have gone up. So if we are able to launch this plan very well, in a simple 20 plan and if it sells very well, even if there are slight negative impact, overall, there may be people who subscribe for under other carriers may come to us. And also, there may be who will be shifting, upgrading their use to 20 gigabyte from the low-capacity use or downgrading from the SoftBank brand. But in any case, we don't believe that would be too much of a negative factor in terms of revenue.

[Unknown Attendee]

My second question, I would like to ask about the stock price. Prime Minister Abe resigned in August 15, and the share prices of your company had gone down. And after the announcement of the new price, the share price had not gone up. And I think that the market is concerned about the further decline. So what is your status of consideration for the new plans?

[Ken Miyauchi, executive]

So in terms of the stock prices, we consider this a serious issue. It had gone down about 18%. You write about this in the media, and Prime Minister Suga said this and that. And those reports will have everyone concerned about the telecommunications business. If the price goes down 20%, people will think that the operating profit will come down 20%. However, as I have said at the onset, we have had the public offering of JPY 1.2 trillion of our shares. And mid- to long term, we believe that we can grow, and I am confident about that. It all comes down to good business management.

[Unknown Attendee]

Healthy competition -- under the healthy competition, how much we can increase the number of subscribers is where we need to compete in?

[Ken Miyauchi, executive]

I am not in a position to say anything about our share prices. But if you would look at this in the longer term, I would appreciate it. As I have said, our business is diversifying. We want to be aggressive in growing various parts of our business. I'm hoping that the share prices will follow our growth. In terms of the price of the plans, we need to think about 5G. Unlimited plan will be announced on a later date. So if you could wait for that, I would appreciate it. Thank you very much for your question.

[Unknown Executive]

Next question, gentleman at the very first row of the block, at the left-hand side of the room.

[Unknown Attendee]

[ Inobe ] from Asahi Shimbun. A follow-on question. So you are thinking of providing unlimited plan even with 5G, but the subscriber of SoftBank comprises much of your company. So I think there's a great expectation for lowering the prices for SoftBank brand. So what is your thinking about that? And as for simple 20, so basically, people who migrate to that will receive the benefit of the lower price. So how would it be sold at the shops?

[Ken Miyauchi, executive]

Basically, shops will recommend large capacity, so that they can earn commissions. I think that's the business model. So even if you look at it from the principle of adaptability, you would -- a consumer would question whether you'll be introduced the perfect plan for you. So with regards to how it will be handled at the SoftBank brand, like I said earlier, we are not in the yet stage to announce it, but we will announce it at a later date. What I can say today is that we will be entering the 5G era, so there will be people who want to use even larger capacity. So I think there will be a segmentation of users, people who hardly use any movies and people who are always watching movies or who want to do Zoom to meet with people. So in that sense, SoftBank brand, is it for them? But at the same time, we do a lot of student discounts. And actually, for students, Y!mobile is popular, but some students are using Merihari Plan as well. They are large-capacity users. So I want to come up with a plan, and that is unlimited use of 5G, that is easy for you consumers to use. And with regards to lowering the price or not, we have not thought about it yet.

With regards to SoftBank shop, those -- we have -- 1,800 shops are SoftBank and Y!mobile. And if you go to discount stores, electronic discount stores, it's Y!mobile and SoftBank in the same place. So we don't -- we want to make sure that there's a good partnership between the 2, that they are not 2 different companies. So we -- they will not push to sell large capacity. Depending on how that customer uses -- it really depends on how much that user uses. So we are instructing the shops to recommend the right plan for them.

[Unknown Executive]

In the central block, the second row on the very left.

[Unknown Attendee]

From Nikkan Kogyo newspaper, my name is [ Saito ]. I have 2 questions. One is MNP commission. You said you have announced that you will be discarding this. But in the first quarter briefing, you have said that this commission should remain for it to remain in stores or the people who are conducting this procedure on the phone. And I was wondering when you have changed your mind. So SoftBank decided to make it free of charge, and I was wondering when you have made that decision.

[Ken Miyauchi, executive]

So over the phone or over-the-counter in the stores, there will be various procedures, which would be generated from it. So I had originally thought that JPY 1,000 fee could be charged. But internally, we have discussed that it may be difficult to categorize it. So that's why we came to a conclusion that all of the MNP commission should be free of charge. This is a result of the discussion in-house. So this is one -- for this, it's JPY 1,000. For this procedure, it's JPY 0. And which would call center fall into as a category? That would be a difficult call to make. So that's why we decided to make everything JPY 0. So it's not a difficult calculation that we have made.

[Unknown Attendee]

Another question is related to NTT making NTT Docomo 100% subsidiary. The market competition environment may change through this. Factoring this in, how would SoftBank's business strategy change? Would it have to change?

[Ken Miyauchi, executive]

So there are various rumors, like integration with COMSAT, et cetera. But I don't know what kind of specific actions will be taken. But in any case, NTT West and East, I don't think that it will be integrated with NTT East or West. So after NTT Docomo becomes 100% subsidiary, the businesses which have been conducted freely by NTT Docomo will be somewhat controlled by NTT. So I think there would be positives and negatives. So I don't know whether there will be much change, but we have to think about fair competition. NTT has everything from the power poles to the optical fiber network. The competition should not be distorted with the backbone network. We utilize NTT's optical fiber network, so if there is a distortion in the competition like change in the charge for the usage of the optical fiber network, that would be problematic. NTT used to be the state asset. So if any distortion happens in the competition, I think everyone will go against it. But under the current situation, I don't think there would be that big impact from NTT Docomo being made into a 100% subsidiary. But we will be -- we will raise our voice.

[Unknown Executive]

But because of time constraint, this will be the last question from the floor. So last question will be the person fourth row from the back -- front, excuse me.

[Unknown Attendee]

[ Debora ] from Wall Street Journal. I would like to ask about public offerings of the stocks by SBG. When did you find out that they will be offering the shares? And why now? Can you give us the back-end story behind this?

[Ken Miyauchi, executive]

You have to ask this question to Mr. Son in SBG. Even if you asked me, I am here as the CEO of SoftBank KK. So I'm not in a position to answer that question.

[Unknown Attendee]

Then when did you find that out? When did you know about it?

[Ken Miyauchi, executive]

Even that question, I'm not sure I can answer that. I don't think I'm in a position to answer that question as the CEO of SoftBank KK.

[Unknown Attendee]

So then my second question, about Ant Financial, about the delay in listing. They're a very big investor. And Paytm, there's a link with PayPay. So would that have any impact on PayPay?

[Ken Miyauchi, executive]

Absolutely none. None at all. Is that all right?

[Unknown Executive]

That will be all for the questions from the venue. Thank you very much. We would like to take questions on Zoom. [Operator Instructions] From Bloomberg, Mr. [ Huga ].

[Unknown Attendee]

From Bloomberg, my name is [ Huga ]. Can you hear me?

[Ken Miyauchi, executive]

Yes, I can hear you.

[Unknown Attendee]

Thank you very much for your presentation. Mr. Miyauchi, you have talked about -- you have said that you felt like you had gone through 2 IPOs, and you mentioned about JPY 1.2 trillion public offering of the shares. And in May, you have sold these stocks to the U.S. investor. So you have offered these stocks 3 times in the past 2 years. We -- I would like to ask the question based on the fact that it may have negatively impacted the share prices. SoftBank Group sold the shares. And they have announced that they would not be selling these shares. And the SoftBank Group communicate to you that they would not be selling any more shares. And do you think that it has been committed? It would not be publicly offered anymore from SoftBank Group. And as a SoftBank Group, there is no intention of increasing the capital. So do you think that the -- it is a commitment that has been put in the press release? So that's my first question.

[Ken Miyauchi, executive]

On that point, I have discussed this with Mr. Son, and my understanding is -- and what I have heard is that there would be no public offering from SBG. And in the press release of SBG, I think it was clearly stated that they would not be offering the stocks further. SBG and SBKK, both are listed companies, and we have -- we now have 59.8% of minority shares. And I think that we are a healthy listed company from that perspective.

On the other hand, at SBKK, there are many engineers as SBG. Like when Mr. Son talked with Jensen Huang from NVIDIA, SBKK is a group company, and SBG will be investing in various companies. And I think that we will play a big role in incubating the companies which SBG invest in because we have a large number of engineers who can help. So SBG has 40% of our shares. And I think that they will continue holding our shares, and I think that they should.

[Unknown Attendee]

My second question is a related question to the first one. SoftBank Group and SoftBank KK have parent-subsidiary relationship. If one pursues the profit, then it may conflict -- have a conflict of interest with the other party. So in terms of the selling of the shares, how much say did you have in Son's -- Mr. Son's decisions? So how -- to what extent SB shareholders be protected? I think that the investors who have bought the shares of JPY 1,500 would like to know about the possibility or potentiality of the conflict of interest with SBG.

[Ken Miyauchi, executive]

The fact that the share prices have gone below JPY 1,500 is something that we seriously take. But from the perspective of governance, we have 4 nonpermanent directors, and we have the directors meeting each month, and we have a very deep discussions. So we have 4 independent directors, and we have a lot of discussions. So Mr. Son would not be interfering with what we do. So rather than conflict of interest, I think that we are in a situation where we are creating a win-win relationship. It's not a conflict of interest relationship. We have various joint ventures with SBG. It was not pushed on us. We asked them. We pressed SBG, so that we would be able to pursue those projects. So SBG is not forcing those projects on us. There are many good health tech companies in which SBG is investing in, and we are able to easily communicate with those good companies. And for us, that's very positive. So there is no conflict of interest. I think you would be able to see that when you come to our Board of Directors meeting, but you would not be able to come. But that's something that I would like to assure you. I have been -- I have known Mr. Son for more than 35 years, and I am able to say anything I want to, to them -- to him. So I have said conflict of interest, but it was [ antimony ]. So I would like to make a correction.

[Unknown Attendee]

I would love to take a look at Board of Directors meeting. Well, it's just a joke.

[Ken Miyauchi, executive]

But these 2 here know very well about that. So you can even ask them that.

[Unknown Executive]

Because of time constraint, we can only take 2 more questioners from Zoom. So Mr. [ Horikoshi ] from Nikkei BP.

[Unknown Attendee]

This is [ Horikoshi ] from Nikkei BP. Can you hear me?

[Ken Miyauchi, executive]

Yes, I can hear you.

[Unknown Attendee]

One question. So investing in 5G and 6G, you said you will invest JPY 2.2 trillion. Can you give me the breakdown, base stations, the percentage that you will share with KDDI? And also, you talked about HAPSMobile, which you have great expectations for. What's the investment scale for that?

[Ken Miyauchi, executive]

Well, since we have invited Mr. Miyakawa, I will ask him to answer that question.

[Junichi Miyakawa, executive]

This is Miyakawa speaking. As we have already disclosed, that by the end of this year, we will be investing in 10,000 base stations in our opening plan. But we were going to say 147 base stations that we would open this year. But compared to that number, we are actually moving at a very high pitch in terms of construction. We're thinking 50,000 next year. And within 5 years, we're thinking 20 -- 100,000 base stations. That's our plan. In the LTE, we had 230,000 stations, and we have been supporting users through that.

Now will -- if you look at the traffic between LTE to 5G, I believe that in LTE, we have plus-50%, plus-33% year-on-year traffic growth. This is what we have experienced. We think that 5G will exceed that. I think from the network provider's point of view, it's destructive. But we don't want to give any limits to the customers. We want to swallow in all the limits and try to provide that to the customers. If we calculate, we think the minimum we need is 350,000 in 10 years. That's the math. That seems like an enormous number, meanwhile. But if you look at China, this is a national project. They say 2 million base stations. There is a tower base stations. It's led by the government. And all carriers are now -- construction started. And of course, 5G is a national project, but I don't think my calculation is too off in that sense. So JPY 2.2 trillion in 10 years, whether we can really complete it within JPY 2.2 trillion or not, this calls for more verification. But because hardware has gotten so much cheap, I think 5G investment is not so much in hardware investment, but I think it's more in construction. Can we really form construction team to work on this? So I think it really is dependent on that as well.

And your question about HAPSMobile, and let me answer that question as well. With regards to HAPS, next -- at the end of September, they have finally flied with stratosphere. And we have done LTE telecommunication test with a U.S. company partner. And they can self generate power and has battery that's rechargeable. And so with natural energy, renewable energy, they can go to stratosphere and they can circle, and they can send -- transmit radio waves. And so physically, it seemed very viable now. And global venture companies are interested in HAPS business. It's active, and there's a lot of hardware that's available. So within the next 10 years or so, I believe that humankind will be able to provide some sort of platform from stratosphere. I am confident that, that world will come.

[Unknown Attendee]

On HAPSMobile -- SoftBank, how much investment will we make?

[Junichi Miyakawa, executive]

We're doing about several billions of yen in investment per year. Within the next 3 years, we can do pre-commercial service. I think we will start off very lightly and then take about 10 years or so to achieve mass critical, so go full scale. So with this pace of investment, we hope to finish up this project to the end in Africa and Southeast Asia and other developing nations where ARPU is very low. These are the regions that's really requiring this kind of service. So we want to complete our projects so that we can provide the services to those areas.

[Unknown Attendee]

What about sharing with KDDI? What's the approximate percentage?

[Junichi Miyakawa, executive]

I'm sorry, I forgot to answer that question. 5G Japan, this is a company that we're jointly establishing with KDDI. I think there are regions -- multiple regions that will be difficult to build 5G stations alone. So by jointly doing this together, we will be able to work on those areas. But at this point in time, the plan is only about several hundreds, maybe 1,000 or so. But once more POC takes place, we can expand areas and we will be able to increase number of stations.

At this point in time, I am not able to share our ultimate goal, but we are talking with KDDI about impact of entities, 100% subsidiary, Docomo, and what we can do jointly. So we will provide infrastructure to the rural areas. If there's emergency, if there's a lot of disaster, then we can provide redundancy. And we believe that 30 years, 50 years later for our next generation, we believe that that's important. So we are discussing that as well.

[Unknown Executive]

The next question will be the last question from Nikkei newspaper, Mr. Ota.

[Yasu Ota]

From Nikkei Newspaper, my name is Ota. Can you hear me?

[Ken Miyauchi, executive]

Yes.

[Yasu Ota]

I have 2 questions. The first question related to price reduction. Prime Minister Suga has said that the operating profit ratio of 20% is too high, and you have 24% operating margin. And how do you respond to the criticism by Prime Minister that you are making too much money?

[Ken Miyauchi, executive]

We have various businesses, and my job is to grow and to be profitable and to return it to our shareholders. I think that's an important task for a private company. Our business, as I have said at the beginning of the presentation, it's diversifying. We have telecommunications. We have Enterprise business. We have Yahoo business. We have -- we are aggregation of various kinds of businesses. In that sense, Yahoo may have higher profitability. But in any case, we will be getting everything that's needed for users, SoftBank brand, Y!mobile brand, the LINE MOBILE brand. We provide those services to our users, so that they will trust us, and we need to pursue a situation where we would be profitable.

So Verizon has a 30% OP margin, very high. So having a good operating margin and maintaining it means that we will pay more taxes, and we would be able to return more to our shareholders. On the other hand, out of the profit in the past 15 years, we had been investing about JPY 5 trillion. And in some parts, we have become #1. And we will be investing a JPY 2.2 trillion in 5G. This means that we are conducting significant amount of investment because we are a telecommunication company, which provides lifeline to our users. So Prime Minister may say that we are making too much money, but we need to satisfy our customers, and we need to increase our revenue and increase our profit. That's the mission that I'm after.

If the users are not satisfied with what we are doing, I think that we need to change our way. And if you look at the portion -- the profit portion from the mobile communications, it's a little over 30%. It's coming down. We have to think about the redundancy of our business management. So that's our strategy. I don't know whether I have been able to respond to your question clearly, but that's the thoughts that we have.

[Yasu Ota]

I have another question. Today, in the morning, Rakuten has started the first eKYC. And Mr. Miyauchi, you have said that Y!mobile have started this initiative in September.

[Ken Miyauchi, executive]

So Rakuten is not Japan's first. So I don't think that they're first. We did not advertise that we started eKYC in Y!mobile. But Y!mobile is selling on the Internet, and we are proactively thinking about eSIM. But what was the -- what was scary to us was the fraudulent activities conducted by criminals of data SIM. So that's why we started eKYC in September.

[Yasu Ota]

With that in mind, eKYC plus eSIM combined together and enabling the use on that day of the contract, would that be possible in the future?

[Ken Miyauchi, executive]

That's where we are working on right now. We have not made any announcements yet.

[Unknown Executive]

Thank you very much. Since our time is up, we would like to end the Q&A session. And with this, we would like to end Earnings Results Briefing for September 2020 for SoftBank Corporation. And this will be streamed on demand on our website at a later date. So please enjoy that.

So thank you very much for coming today for Earnings Results Briefing for September 2020 by SoftBank Corporation.

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