SoftBank Corp
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SoftBank Corp
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Ladies and gentleman, thank you very much for waiting. We would like to start the briefing for earnings results for the 9 months ended December 31, 2020, of SoftBank Corporation.
First of all, we would like to introduce to you the attendees. President and CEO of SoftBank Corporation, Miyauchi, this is Miyauchi; Representative Director and CTO, Miyakawa; Board Director, Executive Vice President and CFO, Fujihara.
This briefing is streamed live on the internet. Without further ado, Mr. Miyauchi will be giving you the briefing on the consolidated results as well as the business overview.
This is Miyauchi from SoftBank. Thank you so much for coming in such a difficult time. I would like to start the briefing. Consolidated results for the third quarter. We were in a very severe environment last year due to COVID-19. However, we were able to increase the revenue by 5%. In addition, there is diversification of our work. If you look at the revenue by segment. All the segments saw increase in revenue. The revenue increase was driven significantly by Yahoo and Enterprise segments. Operating income was JPY 840.6 billion (sic) [ JPY 841.6 billion ], up 6%.
Looking at the operating income by segment. Per consumer, there were many impacts from COVID-19, for example, shortening of the operating hours of our shops. And there was stagnation in the sales of the devices for some time. However, if we look at the first to the third quarters, the consumer service was very steady, and we were able to grow. And in addition, Yahoo and Enterprise profit increased significantly. There will be a detailed explanation about the situation for enterprise.
Next is net income. Excluding onetime factors, we were able to see significant increase about -- but due to those factors, net income remained flat. If we look at the full year, we expect increase. And excluding the onetime factors, it was around -- there was an increase, but there was onetime factors such as impairment, and that was around JPY 30 billion. And Z Holdings was doing very well. And the minority shares had been deducted, and that was around JPY 20 billion. So the temporary decrease was around JPY 50 billion. And all in all, the net income was JPY 433.8 billion. This is the consolidated results for Q3. Revenue was plus JPY 189.1 billion, plus 5%. Operating income had increased by JPY 46.5 billion, 6% increase. Net income was negative 1% year-on-year.
If we look at the full year forecast, the revenue progress was 87% to the plan. In operating income, the progress rate was 91%. For net income, 89% progress. So high progress was seen in relation to original forecast. Because of this, we have decided to revise the full year forecast upward. Fiscal year 2020 revenue target was JPY 4.9 trillion, but we would like to add on JPY 200 billion to make it JPY 5.1 trillion. Operating income, we will be revising it upward by JPY 50 billion at JPY 970 billion. And for net income, we will increase the forecast by JPY 5 billion to JPY 490 billion. These are the reasons for upward revision to forecast.
At the beginning of the period, due to the COVID-19 pandemic, we had expected that there would be a huge negative for us. However, there was digitization going on in our customers. So there was a lot of positive factors from it. And there are 4 major factors for upward revision. Enterprise telework-related business contributed to higher-than-expected profit. So there was so-called cocooning consumption. And because of that, e-commerce of Yahoo or ASKUL or ZOZO had grown significantly. In addition to that, in mobile due to the pandemic, we had considered that the [indiscernible] will come down, but actually it had picked up as time went. In the distribution business, it had worked together with Enterprise segment to get a large-scale government ICT project, which had contributed greatly to the growth. So our strategy is as I have always been saying, is to build on top of the telecom business, non-telecom businesses, such as Yahoo, LINE, which are the Internet companies and also new business fields, such as PayPay, joint venture. So all of this included is the SoftBank growth strategy.
We would like to especially grow the non-telecom business, which has become the growth driver for us. Little over 2 years ago when we were listed on the stock exchange, I had brought this picture as are ideal. And now our Beyond Carrier strategy has become a reality. If we look at the revenue composition, this shows fiscal year 2017 and this year and the reference of what will happen with line. The mobile communications charge will be around 27%, 28%, but the enterprise Yahoo content services and those service-related businesses including distribution, will be more than 70%. The analysts are always concerned about this. And there are a lot of newspaper articles written about the reduction -- significant reduction of the mobile communications. But as you can see, there is a gradual decrease of the ratio from mobile communications charge. And there is a diversification of our business, and we now have different drivers of growth.
And now I would like to go into the discussion about the Enterprise business. The business solutions and others had grown significantly. And the revenue the -- in the revenue business, solution had grown 70%, mobile, 10%. And overall, it was up 8%. In particular, please look at this. I have been saying from before that Enterprise business will grow significantly and very quickly, and people have doubted, but as you can see, in Q1, it was plus 11% year-on-year; Q2, plus 26% year-on-year. If you look at Q3, plus 27% year-on-year. So that's a significant volume.
When I first began, to service the President, the operating profit was JPY 50 billion. So within 5, 6 years, we have been able to double operating income. So you can see JPY 1 trillion in horizon. So that's the Enterprise business. Why have we been able to grow this much? And why do we have so much expectations? Because there's been a significant change from the past. We have cloud, IoT and security and many others, but in particular IoT and security have grown by more than double from the previous year. So in the last few years, we have been planting seeds in the Enterprise business. Mr. Miyakawa will talk about this later on. But technology and Enterprise have worked together to promote this business. And this is before 5G. Now with 5G coming in, this domain can have an explosive growth, and that is where we are putting in much of our efforts. In light of the situation, in the [indiscernible] Tokyo, we have opened 1 of the largest data centers. Total size is 48,000 meters squared and 4,000 reps in capacity. I don't want to really talk about the exact location, but it's in the middle of the city. And actually, we have Phases 1 through 4 in construction phases. But Phase 1 has almost been sold out, major Internet service providers. We will also use it as well, Internet services. So we have hyperscale companies who are placing orders with us. And cloud computing will become significantly important going forward.
Mr. Jack Ma was saying this from before, it's all about cloud computing. So this is where we are focusing and putting in much efforts. Perhaps I talked about this before, but I believe that 3 major digital revolutions have come all at once. If there wasn't a pandemic like this, COVID 19, maybe it would have taken 5 years, maybe 10 years, but it came all of a sudden. In 1 quarter, it has been growing by 27%. That's -- one of the reason is because of the digital communication. Many of you are watching this on Zoom. I myself, I would say, is meeting -- having meetings on Zoom, 95% of my time. From morning to evening, I'm using smartphones, iPads, in the cloud environment. I'm using digital communication in the cloud environment. And also, we see automation of operations. In order to realize this, we need digital automation. Through this, we can realize cost reductions and efficiency improvement. So what we have implemented, we want to promote it to other companies in Japan. And what I think is really the biggest revolution is digital marketing.
In other words, we use data to strengthen our marketing and sales activities. In this environment, we can't go knock on doors and meet people in marketing and sales. In light of this environment, the most important thing is big data. Using this data, utilizing it we can engage in marketing and sales activities remotely. This is not just for large companies, but for SMEs and restaurants, for all companies. So this is where we are working on one by one.
So in summary, as you can -- you know already, Enterprise business started with the acquisition of Japan Telecom, and we have really developed this business together. So we were only selling communication on a stand-alone basis. But as you can see today, we market solution business. It could be cloud, security, AI, RPA, IoT. In particular, in terms of reform, we implement in the enterprise business. Strengthening in-house workforce is extremely important.
Other divisions are using RPA to reduce headcount. But in the Enterprise business, we're increasing our workforce and who are those people? It is DX talents like who can do consulting sales, business producers and basic consulting skills. We collaborate as well, but we also compete with Accenture and other companies that have system engineers or software engineers. So it's a competition and collaboration. But we have about 1,200 headcounts in terms of digital talents. So we basically automate all businesses. We provide digital marketing support as well. So with the support of DX talents and technology departments, we can realize this sort of solution type business. We're increasing solution engineers and solution sales talents. And with this, we are able to solve these individual issues of our customers. And as a result, we are providing previously network or smartphones or we're selling data centers. So it was selling each one of these items individually. But now we are providing a comprehensive total solution to the customers. This is not just about improving the customer systems, but it's actually helping customers transform their business model. This is the case with Japan and also around the world as well, but they have to transform their business. Otherwise, they will not be able to survive in this environment. And in one sense, you can say that we have the greatest know-how in this area. So we provide consulting to the final support, ultimate support. That's our strength.
In that way, we believe that we can achieve a CAGR of 15% in Solutions field. And after March, Mr. Kawabe and Mr. Idezawa, I'm sure they will talk about this. But we think this is the biggest area. Up until now, that was our aim to put the holdings under us, but this is the greatest touch point on the customers. SoftBank does M2M. And if you exclude IoT, we have 30 million users, but Yahoo has 80 million users. PayPay, within just 2 years, they have 35 million users. LINE has 86 million users. So we have a touch point with almost all end users in Japan. And this data can be linked with companies, municipalities and Japanese corporates, and we can actually expand digitization among the end users. This is the B2B2C model expansion. And with this, we are able to invite customers from one after another. Meanwhile, this is true with this building as well. We signed contract very quickly. So Tokyu Fudosan real estate and us have designed this together. And we have more than 1,000 sensors in this building. If it wasn't for this environment, I would have loved to take you around this building and giving a tour. But basically, everything is done, facial recognition from the entry of the building into the office, and I'm sure you have seen the robot cleaner. So cleaning robot around. So everything is digitized like this. And we are receiving inquiries about such type of buildings from also companies. So we want to connect all the buildings around here to build a smart city in this area. And we want to expand this know-how to other companies and cities in Japan.
So let's look at 5G. As we have committed from before, so at the end of March, we will have 10,000 5G, 6G base stations, at the end of 2021, so that's March, and we expect 50,000. With this population coverage will be more than 90%. So our Enterprise network recovered 99%. And we have 90% of 5G coverage, it's an overlay. And ultimately, in 2025, almost all the 5G, about 200,000; and 2030, 350,000, maybe even earlier. In light of the situation, we will never -- we will relentlessly continue to invest. We have been talking about Enterprise business even before, but the most important thing is not so much 5G consumer smartphones, but it's the digitization of enterprises through 5G. And this is why we want to continue to invest upfront. And with regards to the surface area deployment, at the end of 2021, March, you can see the bright red is 5G service area. And you can see this is Tokyo, Nagoya, Osaka, and you will see by March 2022, larger areas in red like this. So in this way, we will continuously expand. And so we will be first to really deploy this kind of 5G service area. So as I've been repeating over a number of times, we have a limited potential for 5G with 5G. Within just Japan, we can realize this number of hundreds and trillions of yen in business. So we have ultra-high speed, large capacity, mass machine connections, ultra low latency, and I think, first and foremost, we will probably see autonomous driving, but also in addition to that, we will see smart city, unmanned warehouse, stores, smart factory, all of these things will suddenly move from this year to next year, starting from this year to next year.
So this is a 5G verification test with SUBARU. We have actually had a test like this with Honda before, but we successfully verified merging assistance that utilizes 5G. We link that with edge computing and using at 70 kilometers per hour, a very smooth and successful merging of the cars. We were very successful at this verification trial. We would like to accumulate these kind of case studies, and we would like to emphasize on the importance of 5G and expand our 5G business. This is something which created a lot of buzz. Together with Osaka City, we have conducted 5G verification trial at X Lab, Osaka. Various companies had participated in this -- for development and verification, demonstration experiences and about 130 million entities have come as visitors.
Next is Distribution business, which is also growing significantly. Compared to the past, the profit has become nearly double the amount in the past. The GIGA School Program, which is a next initiative, which aims to provide 1 device per student and also deployment of WiFi at schools and improvement of telecommunications at home. More than 200 municipalities have ordered more than 1 million devices to us. I think in terms of share, we are close to number one, I don't know about other companies' figures, but I think that this is a significant number. Why were we able to acquire this much share? It is because we have been able to provide comprehensive support to the GIGA School Program.
Next, I would like to talk about Yahoo. Yesterday, the financial results were already announced. With the growth of commerce, the revenue grew by 15%. Operating profit has also increased by 15% year-on-year. I think this is the most important. This includes auctions -- this excludes auctions and travel. And this is only Yahoo Shopping related e-commerce business. There has been an increase of 54% year-on-year. There is a steady growth from this business. E-commerce is critical for us. The growth of e-commerce is something that we can expect high growth from. And we have believed that the advertising revenue will go down significantly. However, we were able to grow slightly by 3% in terms of the revenue. In -- sometime in March, there would be a new strategy briefing by the 2 leaders. I hope that you would be able to come and hear them speak then.
Next is smartphone payment service, PayPay. It has been 2 years and 3 months since this service has been launched. Number of users has exceeded 35 million. Number of payments have exceeded 500 million times in the third quarter. We have thought that the situation will be difficult under COVID but we were pleasantly surprised otherwise. The -- there was a time when Japan post problem has occurred in terms of the e-commerce payment, and there was some sluggish growth back then, but that has recovered.
The Beyond Carrier new business fields are important to us, and we want to build new unicorns in Japan, and the representative example is PayPay. And in fintech, security, mobility, real estate, health care, in variety of fields, we have conducted various initiatives, and we would like to continue this. The SoftBank's Vision Fund has recorded a very good performance. They are investing in many unicorns and successful companies which come out of the Vision fund, we would like to consider having joint ventures with them, and we would like to grow significantly in the new business field. So the securities companies have come to us about if PayPay goes public, it will -- there would be a lot of profit, but SoftBank and Yahoo have collaborated in PayPay. And Yahoo has a very good reach to the customers as well as the traffic and Paytm in engineers, 100 of them who has come to help us. The synergy had been created in incubating PayPay business. This is a successful example we would like to repeat in other areas. So the non-telecom business will be the drivers of growth. And at the same time, we would like to improve the telecom business as well.
So I would like to talk about the consumer business. So even with COVID-19, we have been able to maintain our revenue increase year-on-year. There's a slight decrease in the sales of goods and others, but you can see increase in consumer services and in terms of mobile communication charges, we have been able to keep it flat. Operating profit has also been increasing steadily, doing very favorably. And most important is the multiplication, ARPU times number of subscribers. And we're really focusing on smartphone subscribers. LINE Mobile, Y!mobile, SoftBank, we have 3 brands, but you see a net increase of up 8%. And the number in January, if you see it, you will see that new adds is year-on-year, plus 50%. Every day, the newspaper talks about other subjects. But you can see that [indiscernible] student discount is really increasing. And we have new adds from these student discount users, subscribers.
And also digitization. PayPay is also a driver, but everyone realizes that smartphones are important. So we thought that smartphone growth will be very challenging this year, but we have found that we have seen 1.9 million, probably close to 2 million. With regards to Y!mobile plan, we had a news release the other day. 3 players are competing over first come/first out or -- but Y!mobile has also introduced a new plan, which is actually taking procedures very favorable. Putting aside the details, what we want to say is that we have a family discount and also if you combine it with home bundle discount, it's always JPY 1,900 or JPY 900, so we're very competitive against Rakuten. And we have more than 8 million in the fixed LINE families. And Y!mobile users, I would say, 60% are also on a family discount, family bundle service as well. So we have been able to offer a very dramatic -- drastic program like this. And also, I believe this will be at the late February, but iPhone 12 and iPhone 12 mini will be applicable for 5G smartphones for Y!mobile. Y!mobile is offering 5G, and we're able to do that with my mobile iPhone 12 and iPhone mini. And we will start sales after late February 2021. Between March, we will begin to -- so very aggressively in March. I know that people have commented that SoftBank has been very quiet these days, but we will be sure we're aggressive on this.
And we have an online exclusive brand, large capacity brand. We have small mid-capacity brands. With multi-brand strategy, we have been implementing for 5 years. And we have always looked at how can we differentiate these 3 different brands. We have been doing LINE mobile for 2 years already. So this is our brand. It's what we call SoftBank online, and we will steadily prepare for this since launch mid-March. So we have 5G, 4G, all offerings, will be existing to serve the customers' needs. And we also want to be sure that we're able to counter the needs of the customers at the shops as well. And as we have been saying from before, 2023, our target is to increase our cumulative subscribers to 30 million. Maybe we'll be able to accelerate this target. But in terms of commitment, we have said 2023 target of 30 million. This year, we have already achieved more than 24 million. So we will continue to increase the number of subscribers. So this is our strategy.
One more thing is cost efficiency. We are originally investing in network quite significantly. But we have been very much cost conscious. You could say we are a cost leader company. We may have talked about this before, but we have this project called Digital Worker 4,000 Project. And we have been able to transfer 2,000 FTEs to digital workers in the first 2 years. And we're receiving a lot of inquiries on this project from many Enterprise customers. It's called Automation Anywhere, it's an RPA tool. And aside from that, we have about 100 operational consultants, which we have been able to train. And aside from that, we have reductions in outsourcing costs, and we also are relocating personnel to growth areas. So we will continue with these endeavors, so that we will be able to achieve this Digital Worker 4,000 Project in 2 years. In order to be cost leader and in order to continue to reduce cost, we need to strengthen our capabilities.
So in summary, growth in Enterprise and Yahoo is due to the demand for DX under COVID-19. With regards to 5G initiatives, we have seen a steady progress. With COVID, we were initially worried about how the work will move, but there has been no disruption whatsoever. By next March, we'll be able to have 90% coverage. We'll be able to expand our existing frequency, and iPhone will also have upgrades, maybe I shouldn't talk about it too much, but maybe by end of March. Then everyone will be, oh, wowed, and you will see 5Gs everywhere. In addition to that, we will continue to be customer first. There was government request as well. But if you actually think about it, those are very good things. I think I take this very positively because we want to the customer first to really please the customers. And I think we have been able to deploy this customer-first 3 brands. And you can see in terms of MNP and number of churns, we have really been able to satisfy the customers and also the pricing structure. I would say it is #1, if, in terms of network quality. So we're providing the world's best network quality and also the lowest price. So I have always been saying 100 million in penetration rate. And maybe in the future, with this sort of penetration, we'll be able to digitize, for example, vaccination as well. So this is a great opportunity for us. And of course, we will continue to endeavor on company-wide cost reduction efforts. We will lower the consumer segment, but we will be able to offset that decrease with the cost reductions. So that's sort of the momentum.
And lastly, but not least, I want to talk about the SDGs. So with 6 materiality that we have identified, we have already been achieving SDGs. These are their priority issues. I believe that our work itself is SDGs and it is the materialities. With the X, we will improve and solve the social issues. We can connect information and people, and we will have more wisdom with information and technology. And this will be allowed with network quality, and we have resilient management foundation. And within just 2 years since listing, we have won high-grade accolades from both domestically, internationally. You can see these 2. As you can see, you can -- selective for inclusion in global, ESG investment indexes, and we have been nominated for MSCI Japan, and also, we have received high ratings from SDGs, Nikkei SDGs and Nikkei Smart Work. These are all important valuations. Global warming is a very -- a big challenge posed on us. One degree increase could cause also the problems. So we want to continue to contribute in terms of ESG and SDGs. So this was sort of the plus offer in the earnings results, but we want to continue to close information revolution and provide happiness for everyone. So that is all from me.
Thank you very much. We would like to introduce to you, Mr. Miyakawa, who would become the new President.
Hello, ladies and gentlemen, from April of this year, I will take the role of an important role of the President of this company. SoftBank's core business was Internet. And around the Internet, we have grown. Internet is the most critical infrastructure of 21st century and is becoming the social foundation. If we look back, there was a time when Internet was used by small number of people. But we wanted to make the Internet something that could be used by anyone anywhere. And 20 years ago, we started providing Yahoo BB Service, which is an ADSL service. And we opened the door to going into the telecommunications business. Since then, the population using Internet has grown significantly. We believe that the Internet should be something that's close to people and something that is portable. After various deliberations, we decided to go into the mobile business and with the BB Mobile business, we have obtained the license, and we acquired Vodafone K.K.
Looking back, well, now we are living in an area where people have -- almost everyone has a smartphone in their pockets. Internet is very close to you. When you open your smartphone, you would be able to access the Internet very easily. And you can access the information from the smartphone. Going forward, it will be 5G era. 5G is not just about providing the network, but also the provision of the platform, 5G itself is a platform. 5G has 2 phases. One, is as a telecommunications infrastructure, where the users will be accessing. That's the conventional phase. The other phase is MEC and Slicing, which are the platform functions. We have to look at these 2 facets. We need to understand it better. So that we can become a comprehensive digital platform going forward. In 5 years', 10 years' and 15 years' time, SoftBank will be going through a huge change. And 5G will be at the basis of that. Takeshiba building in which you are in right now, as it was explained in the presentation, there are 1,000 sensors and cameras. In the platform, which consolidates that, there is an AI platform, which controls the air-conditioning elevators and there is optimization going on, on the AI platform. We want to create a platform with the structure of digital twin, so that we would be able to conduct overall optimization rather than having individual optimization. In addition to buildings, the cities itself or the governments can be in the scope of the overall optimization. We want to work on those areas going forward.
Mr. Miyauchi talked about Beyond Carrier, and he has sowed many seeds. For example, Yahoo, LINE, ZOZO PayPay as well as MONET. In my era, we need to harvest what would be growing from the seeds sown by Mr. Miyauchi. We want to become a digital platformer. I would like to make that happen. We want to create new common sense with technology as a guide. That's my theme. I want to make today's challenge a common sense of tomorrow. And I want to build a company, which continues to evolve. After April, I will be touching upon the details of this as I lead SoftBank. The current SoftBank and the Softbank from next fiscal year, I hope to continue to have your support. Thank you very much.
Thank you very much. We will have a photo session of Mr. Miyauchi and Mr. Miyakawa. We have handed you the material at the reception. But I will explain once again.
[Operator Instructions]. That would conclude the photo session. Thank you very much.
[Foreign Language]
[Interpreted] So we would like to now take questions from the floor. We can also take questions online as well. [Operator Instructions]. We are ready. So let us begin the Q&A session. [Operator Instructions]. So please raise your hand now from the floor. Left hand block from the front, the first row, gentleman in the middle, please.
I have 2 questions. First question is regarded to smartphones. So currently, you see diversification of your business, and I understand that well. But on top of that, I think you will begin to see the full-scale impact of the lower prices for smartphones. How much impact do you expect? And you will probably offset this with non-telecom business, but what is the pace in which you'll be able to cover offset? And if you can just quantify that with numbers, please?
We have simulated. But whether that would actually proof be right or not, we do not know. But we are looking at this quite conservatively. And with regards to consumer telecommunications, operating income, we will do expect a slight decrease. Meanwhile, as I said earlier, the competition is intensifying, but the prices have really lowered to this. And I think this is extremely challenging for N V and O, but -- NVO. But I think we can probably increase subscribers. Now we have to really implement it to see how it will turn out. But of course, we can't give ourselves -- excuse ourselves like this. So we have projections on how much it will be lowered. And then we will lower cost in accordance with that. And we will also look at upside opportunities. For example, Enterprise business, Yahoo, Z Holdings. And we have many other subsidiaries, so that's how we will coordinate and adjust. So next year, you may not see a big step-up increase like this year. Maybe that's probably the better way to describe it.
And my other question, I want to ask this question to Mr. Miyakawa. After April, when you assume this role as a President and CEO, you will talk about specific policy and strategy. But before your assume that position, at this point in time, what do you see as a challenge or issues that you see that SoftBank needs to work on? If you could just maybe list 3 top priorities as a SoftBank president?
I don't know if 3 is the right number, but 1 challenge I see is that as has been same from before, with the lowering of the prices, of course, at a glance, the concern about deterioration in our performance, but we are very much committed to improving our business performance, earnings results, no matter what. So even though the prices will be lower, and there may be some damage on the consumer business, but enterprise business will earn more, so that it will offset that and increase our overall results. So that's 1 challenge.
And the second challenge is the start of 5G. It's a big transition period. It was people-to-people, but it will be net to Internet to Internet or things-to-things or things-to-services. So Smart City platform, we have already begun the services, but we believe that every industry will be redefined. I think this is an area where we will see a big transformation. So we described this in 1 word with DX digitization. But we believe that within industry reform, how much can SoftBank play a role in that industry reform. I think that's the probably another challenge that SoftBank faces. So unlike the conventional telecom company, I think we will have maybe a slightly different structure from that.
And you said 3. So this is something that came up in my mind, as I was speaking. But as a company, as a whole, we're really focusing on AI. And we have different initiatives. We are in the phase of human resources development, and I think we have actually been able to see the goal. And with the integration of LINE, we have new engineers who are really joining our group. So the tech team needs to really increase their knowledge and know-hows in AI. And we want to be a leader in AI, and I think we need to really build our positioning in that. So our strategy going forward is that I talked about how we want to be a comprehensive technology platform. But in the core of that, I think it would be AI. So that's the challenge that we want to really endeavor on. So that is all from me. Thank you very much.
Thank you very much. Any other questions? I would like to designate the central block, the third row from the front, the person sitting on the left.
This is Murayi from Weekly Diamond. I would like to ask about the change in the President. But I would like to ask Mr. Miyauchi is why this timing? Why is the President changing at this timing? SoftBank does not have the exact tenure for the President, and I understand that the decision was made by Mr. Miyauchi to have the change in the President. And you started the discussion about the change in the President last year. And I was wondering what triggered this discussion. Is it because the business is at a turning point? Or was there any personal issues like age? So what is the reason why you have decided to change the President at this timing? In addition to that, what I would like to ask you is that after 2015, Mr. Miyauchi, you have been the CEO and Chairman Son had not been in touch with the management of the SoftBank K.K. So I was wondering how he was involved in the management of the company. And he will become the Director from the Chairman. And what is his role? What is Mr. Son -- how is Mr. Son's presence to SoftBank K.K.?
To your question about why this timing? Companies are about having handing a baton to the next generation. And I had joined this company about 3 years after Mr. Son had established the company. And I have been working since then. And in order for the company to grow for virtuously handing over to the next generation is very important. We have the Compensation and Appointment Nomination committee. And we have Mr. Horiba, who is the External Director, who is the Chairman of the Compensation and Nomination Committee. And we have auditors, external directors, who are involved in this committee. And they have proposed that we should be thinking about the succession plan. I have been involved in the business of SoftBank since the founding of the company. And since 2000, we started the broadband business. We have acquired the ad broadband business. And in 2015, 5 companies had merged to become SoftBank KK. And I committed myself in growing the company, and I have been working for 6 years since then, and Z Holdings' President is Mr. Kawabe. And SoftBank KK has Z Holdings under its umbrella. And starting from March 1, LINE will be integrated. And I have a commitment that I have made when the company became listed. I talked about the return to the shareholders as well as the Beyond Carrier strategy. The Beyond Carrier strategy is not completed yet, but it's more visible as to how the strategy will be realized. SoftBank will move away from just being a carrier to being a platformer going forward. SoftBank will become an internet technology company. And we are at a turning point now. We are transitioning to that phase now. Every month, I have participarted in the Compensation and Nomination Committee, where there are 5 members, including myself, and we had deliberated. And at the end of November, we have made a decision of the change after Mr. Son assent -- approved of this change. I am not retiring, but I feel very good about this change. I want to work on the third new business. It's not just about the SoftBank's vision Fund, but there would be a lot of new things which will be coming in. And I would like to concentrate myself on those new businesses.
In addition, what I would like to say next is about the role of Mr. Son. Mr. Son, what he has done from the past each time he's found new businesses, Mr. Miyauchi, you work on it. But in the executive meeting, I have had a lot of fierce discussions with Mr. Son about those businesses. So Mr. Son is always at the management meeting and challenge us about our thinking. And for me and for Mr. Miyakawa and for other officers, his view given -- being given his view was very good. And some people say that we are just puppets of Mr. Son, but that's not the case at all. Mr. Son used to be the External Director of Cisco when he was young. And every time he went to the Cisco's management meeting and come back to Japan, he would say that the situation is so different from the situation in Japan, the external directors of the United States would ask very hard questions to the internal directors and the President of Cisco had been sweating all day to answer the questions of the external directors. And in the case of SoftBank, we have hundreds of meetings of the management. And Mr. Son is the Founder and the Director, and I have succeeded his role when I became the President. And I am now passing on to Mr. Miyakawa. Mr. Son has various knowledge. And he knows about the operation. He's not involved in a day-to-day operation. But he would come to the management meeting each month, and he will give us his feedback from the user's perspective. And what has been lucky for us is that, as I have said, the reason why PayPay had become so successful is because we had Paytm in addition to us and Yahoo. And SoftBank Vision Fund have played a big role in that. I think there would be many unicorns, which would be generated through the investment of SoftBank Vision Fund. We want to bring those unicorn in Japan or from there, we will bring those unicorns to other Asia markets. Mr. Son would be able to provide us various advice to us from that perspective. I hope that answered your question.
Additional questions? To the left block, the gentleman in the third row.
Inoue from Asahi Newspaper. You talked about how smartphone prices have to be lowered. And because of that, you will offset that with different growth areas. In particular, next year, which are the areas you expect to see an explosive growth. So if you could list them? That's my first question.
And second question, changing the subject. The ex-SoftBank worker who transferred to Rakuten. So I understand this maybe still be in the investigation stage, but as much as possible, what areas were trade secrets for -- or sensitive information for SoftBank? And how do you plan to deal with the situation?
So with -- okay, I understand. So with regards to the pricing. As I said before, we have planned to offset it with the growth in Enterprise business. In Q3, we were able to grow our operating profit by plus 27% year-on-year. And with 5G network, we believe that in Enterprise business, we'll be able to grow quite significantly.
Aside from that, Z Holdings, by the way, I can't talk about the Z Holdings so much in detail because it's a public company, but they plan to be profitable. And in addition to that, we have many other companies under us. For example, PayPay, their equity method company. And they are currently booking large losses, but I believe that their losses will be reduced to half. So they will contribute. And also more than in the operating profit level, but if you look at it in terms of net profit, net income level, we have a lot of treasures that we have been able to really build up cyber reason. For example, you may do an IPO in the future, we don't know. But we have many IPO reserves.
In addition to that, we have SBPS, it's called SoftBank Payment Service. This is very steady. And also our business and sales of goods, distribution business, we have more than JPY 20 billion in sales. So the need for digitization is big. So if you build up, and of course, we have cost reductions as well. So if you add it all up, we believe that we will be able to keep from going negative. But that's the big responsibility of Mr. Miyakawa. But it's not that our overall business will suffer because this is a company, it's the overall ship. And of course, there's ups and downs because of the ways. But we are always kind of flowing with the waves of the digitization and also the waves of AI. So up until now, we have been able to increase in profit and revenue in all segments. But going forward, even if there may be some ups and downs depending on the segment, we'll be able to [ level ] this and offset it with the other business segments. So that is why we want to diversify our business as well. I know when I'm not quantifying it, but I should be able to -- he should be able to do that next May. And we will be able to say this is projections for next fiscal year, as I'm sure Mr. Miyakawa will be able to announce that. So if you could just be patient a little bit more. So thank you. Appreciate that.
With regards to Rakuten, to be honest, to be very clear, this shouldn't have happened. So in that sense, our trade secrets has been stolen by fraudulent method. It's a very material case. And our trade secrets should not be used by Rakuten. So we may instigate civil case against Rakuten, civil lawsuit against Rakuten. So it's the backhaul base stations of our 4G network. Even from our days in BB for more than 20 years, it's a know-how we have been built in over the years. And where do we build our base station, this is an enormous amount of work. And this is sort of a trade secrets, I can't let it go. I mean, we can't accept it the fact that it's been stolen. So I know that investigation is still underway. So we do not know how it will turn out, but this is our response. Does that answer it? I don't think you should talk too much about it. I apologize.
Thank you for the question. Due to the constraint in time, we would like to take 1 more question from the venue. In the center, the third row from the front.
[ Huida ] from Bloomberg, I would like to ask about PayPay. And the second point is the question with regards to cost control. During the presentation, Mr. Miyauchi mentioned about PayPay. And you have been approached by securities companies. And if PayPay would become public, it would -- there would be a huge profit. So was that a proposal for the future listing of the company on the stock exchange?
It's just a proposal. It is not that we have made a decision on that. For PayPay, securities companies have evaluated PayPay very highly and the proposal was why wouldn't you bring to the listing of the stock exchange. So you talked about the unicorns first, and you talked about the a listing of PayPay. And so would that be a very big JPY 100 billion level company, if it becomes listed. Well, I should -- so it's not that level. It's just a proposal, and it's also sales talk for them. But I think its value is like creating another Yahoo. We don't know what will happen unless we materialize it. But as SoftBank KK, as Mr. Miyakawa mentioned, we want to create a platform. We have network. We have Salesforce and we have traffic from Yahoo and LINE. You. Okay. There are many companies, like in the fintech or health tech area. And in order for those companies to have a rocket start, assets of SoftBank can be utilized. So together with Mr. Miyakawa, I would like to work on those new businesses. Mr. Miyakawa will be working to grow the existing businesses bigger. And then I would like to cooperate in creating new businesses. I have a proposal.
So the red ink is big now, but you said that it would be shrinking it. And when do you think you would be able to list the company?
I think in the world of the United States market, you would be able to go public any time even if you're making a red ink. It's just Japan, who would not allow that. It's about the number of customers. When the customers are growing at this pace, it would bring a lot of energy to the company. The customer acquisition cost is very high. So once you acquire that customer, you would be able to more easily move to the black ink. If you think about Alibaba, it turned into the black ink only about 5 years ago, but what they have done is to grow the number of customers. So what is important is not to fear and acquire the customers proactively. So because we are proactively working in this area, there are many proposals being brought to us. So it's just a proposal.
I would like to now ask about the cost control. So I came to this new headquarters building, and I was so surprised by the size of it. And you said that you are having meetings, 95% on the Zoom. So if you were to control the cost, is there a possibility of shrinking the renting space for the office?
What we had, Shiodome office and the -- another office in Shiodome, we were dispersed. But here, this building is relatively cheap. So I should not say too much about this because it would make things so complicated. But currently, under the state of emergency, 88% to 90% of our workers are working at home. And even after the state of emergency, we believe that it would be about 50% who would be coming to the office. And the cost -- on a yearly, cost will go down. And the people who come here would -- may worry that because we are in such a luxury building, it may be spending too much cost, but that's not the case. So this space would allow for the tens of thousands of people to work. And also, we have created a remote workspace through WeWork. Under the new normal area, because we are consolidating all of our group companies here, it would be more convenient. And I think that the -- I think that we would be able to bring down the floor space to 50% the level of before, so it's a cost cutting.
Thank you very much. So that is all from the questions from the floor. We now like to take questions from Zoom. [Operator Instructions] So we invite now Mr. Masuno from Nomura Securities.
Masuno from Nomura Securities. Can you hear me?
Yes, we can.
So I want to ask about your midterm strategy. So your core strategy is the 30 million subscribers in smartphones, and we believe that you can accelerate this by 1 year. And also Enterprise business profit doubled. We believe that I think it will probably progress in according with your plan. And on top of your core, you have new business -- businesses. Now with regards to PayPay, if you talk about being profitable, maybe if you make the fees not free anymore, then I think you will also begin to be profitable. And also, you can add different items that's related to lifestyle. Now you may have financial services. Now do you think can you really book revenue and profit from that. So please give us your visibility on this. And also, with LINE's strategy, I know that you will announce that later on, so I will wait upon that. But within terms of shareholders, you have Neighbor as a new shareholder. Now Neighbor is a global company. And maybe you will have a global strategy, perhaps maybe, call, beyond Japan. So what is your plan on global development? So those are my 2 questions.
With regards to your first question, PayPay, we have taken 2 years to increase the number of customers, and we have tried to increase this to more than 30 million. And in order to increase the number of customers, we need to have many merchants as possible. I think we have about 2.8 million stores. So we have spent a lot of our operating expenses to add shops. And I think you could have a good sense about how you can use PayPay in different places. So we need to really strengthen that. So we will have working on this, and we will continue to work on increasing number of stores, purchase. And as for these smaller papa-mama shops, the fees are 0. But as for, for example, chain retailers, we do receive a certain percentage in fees. So in one word, with regards to the timing, I can't talk about it today. But if you look at the percentage of credit cards, I think in a small shop, it's like 3% or so. But if we go with maybe half of that, between 1% to 1.5%, if we begin to charge the stores, merchants, then PayPay will actually be breakeven because of the number of merchants, that we have been able to acquire so far. So on top of that, what do we need to do? FSA, so Japan financial services agencies, and we are in this discussion. But 1 example is we are beginning to do this bonus management by PayPay. So PayPay points can be invested and managed, and we've begun that. And through this, you're able to get a certain percentage through investing PayPay points. And this, all of a sudden became 1.8 million, who's using this. And now we have PayPay Securities from February, and that's who's running this behind the scene. But we have PayPay Securities that will be added on the results of PayPay. And also we are slowly, but gradually adding fintech services like this. And through this, we will be able to increase our earnings. But where do we think it will have a big hit and where we will be able to shift gears, we don't know yet. We think we have to, first of all, become about more than 30 million, maybe 40 million in terms of users and become overwhelmingly strong. And we are launching a new campaign in March. I think we're in the stage where we need to really expand the number of users, customers, and what -- so the users and the stores, the merchants need to be increased. We need to really provide an experience that is satisfying to the users. So in reality, in terms of use experience, the number of payments is now on a monthly basis, more than 170 million. That's a significant volume. And I believe that this is 1 successful model, and this is something that we need to develop a little bit more, so that we can, for sure, become a profitable company. So that's what we think. I hope that answers your question.
Yes.
And with regards to Neighbor, your -- that was your other question, right?
Yes.
We have not announced this yet, right? Okay. So we should be able to announce this very soon. But with regards to Neighbor, we have been meeting with them once a month. And they want to do beyond Korea because Korea is a small country. And in reality, LINE. LINE Taiwan and LINE Thailand, Indonesia and maybe they have other markets. But they're actually quite global. And in fact, Taiwan and Thailand, they have a very large -- they're dominant player. They have a dominant market share. So the technology that Neighbor has is great. Smart stores, as Mr. Miyakawa mentioned, they have a great number of AI engineers. So this exchange between our engineers and their engineers have begun. So they're a very powerful company. So in that sense, if we can, together, deploy beyond Japan, beyond Korea, then we will, maybe, have more specific projects for beyond Japan. And I can't talk about it in detail, but there's no doubt that it will -- we will promote globalization. So we are very much aligned to Neighbor in that sense. Thank you very much. That's all from me.
Due to time constraints, we would take questions from 2 people, and we will end the question-and-answer session. From Nikkan Kogyo Shimbun, Mr. [ Sito ].
From Nikkan Kogyo Shimbun Newspaper, my name is [ Sito ]. Can you hear me?
Yes.
I have 2 questions. The first question. At the end of last month, Rakuten Mobile has announced new price plan. After the new fiscal year, how would that be impacting the competitive environment as well as your performance? If you could talk about that, I would appreciate it.
The small volume and the middle volume is where Rakuten would have good opportunities in. And how would you be responding to that condition. Do you have any extra measures that you would be taking to counter Rakuten. Rakuten Mobile has created new plan of having JPY 0. And they are advertising a lot. For example, in the newspapers, they are working very hard, I understand. So in that sense, I think that there would be a certain impact on the market. But on our side, we have the SoftBank brand and the Y!mobile brand and when the MIC was wanting to increase the MVNO, we started taking initiatives to respond to it. And Y!mobile now has a new plan, which would be -- enable the users to use 5G as well as 4G. I think SoftBank and Y!mobile is not just about the Internet. It has a very solid infrastructure for sales and marketing. So it's not just about the pricing, it's also about the network quality. We have 99% coverage in 4G, in hot springs, in golf courses or in the ski area. Rakuten is saying they have coverage of 96%, but the remaining 3%. To cover that, it would take trillions of yen for investment. It took about 7 to 10 years, who have -- and people have for us -- during that time, people complained that our network's connection was not good in golf courses, et cetera, or in Karuizawa. So the network quality in -- which is expected of in Japan is different from India or the United States. So -- and Rakuten has been providing the JPY 0 plan for quite some time now, but not many customers are moving to Rakuten. People are very conscious about quality.
Another point is 5G network. The devices, the handsets, which would be launched going forward, will be 5G enabled. So how -- it will be a competition amongst the player of how much investment the players would be able to make in 5G. In that sense, we have competitive edge to have good handsets to have thorough customer support. The comprehensive capability that we have would play an important role. So I'm sure that Rakuten will be doing their best. But we would not be inferior to them. We would be able to counter them.
My second question, I would like to ask Mr. Miyakawa. During your speech, you said that you want to continue to challenge the company to do new things. So generally speaking, as you expand, you would become a big company. And when you become a big company, you tend not to take on new challenges. That's the trend. But the reason why you have said that you wanted to continue to challenge the company to do something new is because you wanted to -- you wanted to get rid of the concerns that you would not be challenging to do something new. And another point, you have competitors such as KDDI or NTT DOCOMO. They are working on various initiatives. But what is the differentiation point of SoftBank? What are the uniqueness of SoftBank compared to those competitors?
So I would like to, first of all, answer to your question about why I have used the term challenge. SoftBank is a company, which was established by Mr. Son. And SoftBank has been continuing to take on various new challenges. We want to continue to be challenged. And those challenges would enable us to go a step further. Mr. Son has emphasized on the importance of challenge, and I understand his concept very well. And I would like to continue to take on new challenges to evolve the company. However big we get, we want to continue to be a start-up.
And to your question about the new initiatives such as AI. In conducting initiatives of Beyond Carrier, so there was a time Mr. Miyauchi has suddenly said that Yahoo should be made subsidiary. And there was a discussion that it should stay an equity method company, but we have made a final decision that Yahoo would be a complete subsidiary for us. And Yahoo and LINE and SoftBank KK users, PayPay users, this vast number of users itself would become a platform. I have finally realized that. We are a business, which would have a touch point with users. We are not just providing content to the users. But we would be able to use those touch points to create the foundational platform. So it would be about B2B2C format. We would like to work together with like-minded companies, so that we would be able to open up our platform for them to use. We hope that the companies would be able to capitalize on our platform, so that the users will be more satisfied. So I would like to create a win-win-win situation amongst all stakeholders. AI technology is something that would enable us to connect all of the stakeholders. AI is not just making things more convenient. By connecting things through AI, we believe that we can optimize any service that we provide. So the AI that we are aiming for is an AI, which would optimize the society. We would like to build such AI, and we would like to place the AI at the core of the company. Did that answer your question?
Yes. If possible, if you could talk about the differentiation point of SoftBank, the uniqueness of SoftBank, which is different from the competitors. How would you be creating that uniqueness?
Well, what I have mentioned are all differentiating points. We are discussing about AI every day. And compared to the competitors, we are -- I don't believe that we are inferior. We now have a beyond AI institute together with University of Tokyo, which would break away from the current AI to become the future AI. So we have environment to consider various opportunities. Whether the competitors will be competing with us or working together with us, this is something that we will be considered for the future, and we are still deliberating.
So this will be the last question.
Mr. Horikoshi from Nikkei BP. Because of time constraint, please keep your question to just 1 question. Thank you very much for your understanding.
This is Horikoshi from Nikkei BP. Can you hear me?
Yes, we can hear you.
So I just have 1 question. Mr. Miyauchi, earlier, you said at the end of November in the Compensation and Emerging Committee, you have decided to appoint Mr. Miyakawa. So I want to ask Mr. Miyakawa, when did you hear about this decision? And what was your impression? If you could kind of recall the scene and tell us what your thoughts were when you first heard that.
I'm not sure how much I can share this information with you. But as Mr. Miyauchi said, Mr. Miayuchi informed me at the end of October. And immediately after that, Mr. Son, also told me. To be honest, this company, SoftBank, it's the sales team that has really driven the company's growth. So I thought it should be a leader in the sales -- from the sales segment that should be driving the company. And that's what I said to Mr. Miyauchi and Mr. Son, but he said that it should be the technology that should be driving the company. So that is why I decided to accept this. And after that, Mr. Son has invited me over to a number of different occasions, so that he could teach me what a leader should do. And in his long-term experience as a leader of the company, he has faced many different challenges and problems and really maneuvered through these challenges, and he has really taught me about what I need to do when I also faced such challenges. So I want to really learn from that as well. So how did I listen to these advices? Did I listen with delight? Well, I think so, but I think I was more calm about it. Does that answer your question?
Okay. Well, thank you very much. With -- this is time, so we would like to end the Q&A session. With this, we would like to end earnings results for the 9 months ended December 31, 2020, for SoftBank Corporation. We will be streaming this on demand later on through our website. So please check out our site later on. So thank you very much coming to SoftBank Corporation's Corp. Earnings results for the 9 months ended December 31, 2020.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]