KDDI Corporation (KDDIY)
Q3 2022 Earnings Conference Call
February 02, 2023, 3:15 AM ET
Company Participants
Ikuko Hongou - General Manager, Investor Relations Department
Shinichi Muramoto - Executive Vice President
Toshitake Amamiya - Executive Vice President
Keiichi Mori - Executive Vice President
Kazuyuki Yoshimura - Senior Managing Executive Officer
Conference Call Participants
Yoshio Ando - Daiwa Securities
Daisaku Masuno - Nomura Securities
Satoru Kikuchi - SMBC Nikko Securities
Kaori Chiba - JP Morgan Securities
Hideaki Tanaka - Mitsubishi UFJ Morgan Stanley Securities
Yoshiyuki Kinoshita - BofA Securities
Shinji Moriyuki - SBI Securities
Presentation
Ikuko Hongou
Thank you very much for waiting. We will now begin the financial results briefing of KDDI Corporation for the Third Quarter of fiscal year ending March 2023. Thank you very much for taking time out of your busy schedule to join us today.
I am Hongou of Investor Relations Department and will serve as the moderator today. This briefing will be broadcast live on the internet with simultaneous Japanese to English interpretation. The presentation will be available on demand on our IR website at a later date. Thank you for your understanding in advance.
Let me introduce the participants today Muramoto, Executive Vice President and Executive Director of Corporate Sector; Mori, Executive Vice President and Executive Director of Solutions Business Sector; Amamiya, Executive Vice President and Executive Director of Personal Business Sector; Yoshimura, Senior Managing Executive Officer and Executive Director of Technology Sector. Lastly, Aketa, Executive Officer and General Manager of Corporate Management Division.
Three financial results related materials. One, presentation material, [indiscernible] quarterly report and detailed material are posted on our IR website. Please refer to the disclaimer in the material regarding statements made in these documents, performance targets and projected subscriber numbers, et cetera explained in the Q&A session today.
Executive Vice President, Muramoto, will first explain the financial results followed by Q&A. Mr. Muramoto, please.
Shinichi Muramoto
Thank you for joining us in the meeting on KDDI business results out of your busy schedules. Before the questions-and-answers session, let me share with you the summary of the business results of the third quarter of the fiscal year ending in March, 2023 and forecast for this fiscal year, next fiscal year and beyond.
First of all, the summary of the third quarter business results. Despite the impacts of fuel price hikes and energy business, we are aiming to increase profit for full year and promote Digital Twin and other future initiatives.
First on consolidated financial results. Q3 cumulative results were generally in line with expectations, excluding the impact of fuel price hikes, et cetera, aimed to increase profit for full year by promoting focus areas and cost efficiency in the fourth quarter. Negative impacts of fuel price hikes, et cetera is expected to ease in the next fiscal year and beyond.
Next on progress towards rebound in communications ARPU revenues gradually easing the impact of price reduction and data usage growth gains momentum with 5G penetration. We are aiming further to increase data usage by making medium and large capacity plans more attractive. Lastly, on sustainability management and focus areas. Business services segment and financial business performed steadily. Digital Twin Starlink, renewable energy generation, promoting future initiatives that provide new values to society.
Next, concerns forecast for this fiscal year ending in March, 2023 and beyond. There are major positive and negative factors. The left shows a strong performance with a small reduction of roaming revenues against the initial forecast. And communications ARPU revenue has been steady.
Moving to the left, regarding negative factors for this term. Energy business was lower than the initial forecast. As for the unexpected minus ¥20 billion for the impact of fuel price hikes and minus ¥15 billion for communication failure are factored in. As for the forecast, concerning the next term and beyond, moving to the right for the positive factors for the next term and beyond communications ARPU revenue and energy business performance stabilization is reflected. Regarding the negative factors, while the impact of the fuel cost hikes continues, the adverse impact is likely to ease.
So much for this summary. Thank you again for joining us today.
Question-and-Answer Session
A - Ikuko Hongou
Now we would like to take questions. To receive as many questions as possible, we would like to limit the number of questions to two per person, and please ask the first question followed by the response, and then your second question please.
We will first take questions from those of you who are pre-registered and are connected to the system. So, let me explain the process. If you have questions, please click the raise hand icon in the Zoom app on your device. When you are appointed after the MC announces the company name and your name, you will see a pop-up on your screen saying the host is asking you to unmute. So, please click the unmute button and ask the question. We will take questions until the scheduled time.
Please raise your hand if you have a question. The first person, Daiwa Securities, Ando, please.
Yoshio Ando
Daiwa Securities, Ando speaking. Can you hear me?
Ikuko Hongou
Yes, we can hear you.
Yoshio Ando
Two questions. March, 2023 and March, 2024 forecast, page seven, please. March, 2024 and beyond the turning point, multi-brand communications ARPU revenues increase was mentioned. So, first, I would like to clarify, the second quarter was a bit sluggish about the net edition of subscribers. Are you confident about the recovery? Also in terms of ARPU, concerning the sustainability what about the support discount impact or decrease of the downgrade. What about the impact of upgrade? In the third quarter I think some factors are manifested. Going forward, what is your outlook? Concerning ARPU, what's the possibility of the increase? If you could share with us the overview, please.
Ikuko Hongou
Ando, thank you for your question. Communications ARPU revenues and ID and ARPU currently and also going forward your question was concerning the outlook. Amamiya from Personal Business, please.
Toshitake Amamiya
IDs and ARPUs, two questions have been raised. First of all, about the IDs, as you understood, concerning the second quarter, slightly sluggish. But in the third quarter where momentum is recovering, especially concerning the IDs, UQ Mobile is enjoying a pretty good momentum. It's likely to continue we believe, and we do have some expectations. We have multi-brand. So, other than this, we have povo. We are targeting Z generation and it's been also stable. Concerning au, how to reduce this negative amount. That's the issue. More recently, from au to UQ, the migration is decreasing. And we believe that there's going to be a favorable movement going forward.
Concerning ARPU, based on 5G, we'll be promoting this. Traffic has been going up steadily in the case of au or in the case of KDDI, the risk of MAX plan still has room for more growth. So the ARPU increase, it's something we really would like to focus on. And in the first half of the next fiscal year communications ARPU, the revenues should be stabilized.
Ikuko Hongou
Ando-san, did we answer your question? Ando-san, we can't hear you Ando-san. Please, if you see the unmute please dialogue box. Could you unmute yourself? When the connection is recovered, we'd like to discuss this. Now, we would like to move on to the next one. Nomura Securities, Masuno-san.
Please ask your question. Please tap the message and unmute yourself. Can you hear me?
Daisaku Masuno
Yes. Thank you. I have two questions. First is about communications ARPU revenue. I think we have a clear direction in the capital markets. They may not be believing this yet. So, you mentioned that by the end -- middle of next year, the telecommunications ARPU will rebound. So, on the natural course, if MAX plan increases or the support discount impact goes away, will this be viable or I'm sure there are many measures going forward. So, new measures, effective measures are in mind. If you could share with us your plan, please.
Ikuko Hongou
Thank you very much. So, Amamiya would like to respond.
Toshitake Amamiya
Yes. About the rebound of ARPU, as I mentioned earlier, our customers will use 5G and the plan will shift to MAX, MAX plan. So, organically we are moving in the direction of the rebound of ARPU, but we want to accelerate this and achieve this as early as possible. And so, there are various measures we have in our plan. We want our customers to use the smartphone without stress and with comfort and enjoy 5G. So, it's not just about ARPU increase measures, but also the improvement of the quality of 5G.
Daisaku Masuno
Thank you very much. Yes. A follow up question. The 5G ratio was 49% at the end of December. This includes UQ and povo. So, what is bell au 5G ratio? And I think that will be the basis of MAX. So, what do you plan au 5G ratio to be next year?
Toshitake Amamiya
It is not a disclosed number, I cannot quantify, but three brand 49%. So, of course, au will be lower ratio. Currently, new subscriber, 60% more or plus is already MAX. So, at this pace we can have a clear view of next year's level.
Daisaku Masuno
Thank you very much. My second question is about your midterm EPS target. From the capital markets the consensus EPS is lower than your plan and there is quite a gap. That's the capital markets view. So, on the EPS basis, you had the communication failure and the fuel cost hike, all these unexpected events. But in two years, on that basis, in order to achieve the midterm EPS target, what pace at the operating profit and buyback do you think you need to conduct and proceed?
Toshitake Amamiya
Let me answer that question. It's our first year still, but as you rightly mentioned, there were some unexpected events and things are not easy. Things are difficult. Our medium term plan is a rolling plan, and we are continuing our discussions. Originally, our midterm strategy, the third year level target was ¥100 billion increase in profit and cost enhancement of 500 billion -- ¥100 billion and ARPU revenue increase at the same level as last year or above.
Among the three focus areas, energy business was unexpected. The profit growth is a bit difficult. So, how to recover this area is our focus now in our plan, the rolling plan as the entire company. But we're not thinking of changing the target yet. So, the growth investment that we have mentioned will be utilized effectively and if possible, ARPU revenue, we want to increase in the frontloaded fashion as soon as possible to come close to the target.
Daisaku Masuno
So, another follow-up question. So, the medium term EPS target will remain unchanged. I understand. In energy deviation, it's maybe ¥10 billion profit difference. And so, I do not think it's a big impact. But other than energy, in the next two years, how much core operating profit, core operating income, excluding business investment, what kind of growth pace are you anticipating in the core operating income?
Toshitake Amamiya
So, to repeat myself in the focus area, uh, profit growth of over ¥100 billion is anticipated. So, energy is a bit weak and may follow slightly short, but in other areas we will catch up.
Daisaku Masuno
Yes. Understood.
Ikuko Hongou
We would like to entertain the next question. SMBC Nikko Securities, Kikuchi-san. Please go ahead.
Satoru Kikuchi
Kikuchi speaking. Thank you. I have three questions. First about KPI churn rate. Year-on-year, it's still high. Q-on-Q, it's still going up. You do have a net addition. The momentum is recovering. So, for acquisition, perhaps you need some cost as I understand. The large scale discount is continuing according to some people. So, contract cost on your business performance. I don't have to worry about the possible impact on the business performance and the current competition environment and towards March, April, what's going to be the competitive landscape and what kind of cost will be incurred? If you could give us any comment, I would appreciate it. Thank you.
Ikuko Hongou
About the mobile competitive landscape and the cost that's incurred and the future outlook,
Toshitake Amamiya
First of all, churn rate. If you look at the numbers year-on-year and Q-on-Q, there's a slight increase concerning this so far, MIC, The ministry, has been making efforts lowering the switching cost and that's penetrating in the market. And the fluidity I think has increased for that part. But that doesn't mean the trend has changed from before. No major impact is reflected and that higher fluidity ratio is an opportunity for us. We would like to take this as an opportunity to increase the number of IDs.
About the acquisition cost that we raised again, there are various regulations imposed on this, and we can't use things in unlimited manner showed exercising certain control. And within the scope of plants we've like to spend the acquisition cost and increase the number of IDs. That's the kind of management we would like to do.
Regarding a contract cost. Balance is going up, but at a certain level, the write-off and making them as assets, we would like to strike a good balance. Again, looking at the entire profitability and earnings, we would like to exercise control. Thank you.
Satoru Kikuchi
Thank you. My second question, focus areas. I have two questions. First, Business Services segment. Profit is increasing steadily. The both revenues and profits increased. Regarding the factors, the third quarter, I would like you to again teach us again.
Ikuko Hongou
Mori-san, please.
Keiichi Mori
Thank you for your question. First of all, Next Core. Core -- Next Core. Let me approach this question in these ways. In the presentation as I touched upon -- as we touched upon Next Core business, the right hand side, corporate DX business, DX business infrastructure, these three. In terms of revenues and the operating income, the double-digit growth has been enjoyed. So, these are major drivers. Together, as you can see on the left hand side, this is a top line of the revenue, 17.4% year-on-year increase. So, these three areas. If you move on to the right hand side, as I said, double-digit growth has been enjoyed.
Regarding the factors. First, what we call corporate DX smart work, the way you work, this is utilized for such purposes. It started during the COVID-19, smart work and security. When we call this managed services, on the part of companies, the remote environment that's typically used in the smart work. The infrastructure management or the operation, that's something that we can provide as a service and that has enjoyed increase. Business DX, there are various variety of services, IoT and other new areas. We have been very active and I hope you come up with high expectations in this regard.
Additionally, about the Core business, communications ARPU revenues, in the case of mobile, not such a high growth like Next Core, but we have been able to increase it somewhat. And just as we try to increase number of IDs on top of communications using smartphone, there are various services, and they are also enjoying growth. And needs for fixed service, it's not decreasing, it's been increasing steadily. Thank you.
Satoru Kikuchi
Which means you have focused on those areas and they are all enjoying growth and that's trend likely to continue. You didn't have any temporary incidents, am I correct?
Keiichi Mori
Well, no temporary incidents or factors put differently. Three years ago, when the COVID started, there was a temporary increase for some, but now it has come back to almost normal times. So, including the smart work, the new smart work, the demand has been brisk and capitalizing on that. Are they enjoying growth? That's what it is.
Satoru Kikuchi
Thank you. My third question about finance. As Masuno-san asked towards the midterm objective, Business Services segment finance, they have room for growth and you need to focus on improving there. But for us, it's rather difficult to see the structure for earnings.
Page six, please. In the appendix, page six in the details materials, banking business and other businesses and operating and earnings and cost. If I do the subtraction, I might be able to see this, but I like to check this once again. This term banking business, the recurring profit, the second quarter it increased, on the third quarter it's lower than that in the second quarter, but compared with the previous year -- compared with the last year -- compared with the first year -- first quarter, it's up and cost also, or expenses increased as well. But what are the events behind this? Housing loans have seen some changes. The greatest interest hike you have Jibun Bank. What's the impact on Jibun Bank?
Likely impact on Jibun Bank regarding the rate hike and other businesses, they're also enjoying good, but cost has also increased under ordinary expenses. Also increased. Credit card, au you pay, they are enjoying growth.
What's the impact on the numbers and what about the revenues and expenses? What kind of curve and how are you going to increase the profit? How is it going to contribute to the EPS of your company? If I could see that the next business term and will be beyond that, I think there'll be higher expectations for your profit. Thank you.
Ikuko Hongou
About the detailed explanation might be rather difficult for us to provide you with them, but to give you a kind of a overview about housing loans, credit, the profit growth going forward, Amamiya-san, could you touch up on that please?
Toshitake Amamiya
Third quarter profit didn't enjoy much growth. I think you mentioned that. Interest rate had some impact. Let me explain. Housing loans, fixed rate loans. There are some of those fixed interest rate loans. The fixed rate loans and the reviewing and the future values has been conducted, and there is a slight negative part and that has a negative result and that has an impact to a certain extent.
But regarding Jibun Bank, as overall business, fixed rate mortgage loans about 5% of the total, unlikely to have a major impact. Going forward, interest rates, if they go up, it will likely to have a positive effect on the total.
Now financial business as a total. Total regarding the bulk of the profits, the bank, credit card, they are the drivers of the profitability. We are trying to expand the scope of the business. So, in terms of cost, yes, the cost has been incurred. So, in terms of profit, profit growth at this moment may not seem so big, but as the scope of the business expands in two years or three years time, we would like to increase the profits.
About the detailed numbers, we don't have them, but that's the overview. Thank you.
Satoru Kikuchi
About the bank, there's impact. I think the mainly they are housing loans, but what about the other businesses in the finance? The difference between the recovering profit and the recurring expenses in the next term and beyond, is it going to go up, meaning that you will not be enjoying higher profit, or are you going to enjoy better profit?
Toshitake Amamiya
Of course, we are going to increase profits. But the rate of increase compared with the current one or two years, three years and four years time, that's likely to be wider.
Satoru Kikuchi
Thank you.
Ikuko Hongou
So, we will take the next question. JP Morgan Securities, Chiba-san, please. Please tap the unmute button.
Kaori Chiba
Thank you very much. This is Chiba from JP Morgan Securities. I have two questions. First is about numbers. Page six, you talk about DX in our focus areas, and the progress of profit. In the earlier Q&A, I understood that it is growing steadily. Now to achieve this year's target, four quarter DX, I think, is expected to grow significantly, is my understanding correct? And along with the pipeline, if you could elaborate please.
Ikuko Hongou
Thank you. Mori-san, please.
Keiichi Mori
Yes. As you rightly mentioned, in the fourth quarter, we plan to grow significantly. So, the pipeline, the business to achieve that, we have the KPI. So, the status up to the third quarter is exceeding the plan. So, by keeping this pace, it is a high goal, but we plan to achieve this full year target.
Kaori Chiba
Understood. Thank you very much. So, just to follow up. In Q4, do you have any particularly large projects or deals, businesses?
Keiichi Mori
It's the year end. So, there are I thing businesses that have higher sales towards the end of the year. Our original core business continues – continuously. But in the Next Core business, of course there are businesses that continue, but on the other hand, there are businesses where we build and charge the fee for that. And the things businesses we build will come into us, will be paid as one time payment. But this will continue into next year and the payment will come on top of that.
Kaori Chiba
Thank you. Another medium to long-term question. Page 23 of the material says renewable. You said that you are thinking of the direct supply. With the fuel cost hike, by taking this measure, what is the cost impact in the medium to long-term? Can this expect cost efficiency? What is your thinking behind this? Thank you.
Keiichi Mori
So, as we made a release in January, we will start this business in April. The first primary purpose is the contribution to zero carbon. On a non-consolidated basis, we are aiming for zero carbon in 2030. The electricity we use in-house is large and so switching to renewable energy is now accelerated. So, for the own use, the renewable energy generation will be accelerated. And cost in the medium term, depends on the cost level around the world, but we think we can procure at a relatively low cost. So, we will have this medium to long-term perspective and enjoy the cost benefit along with the carbon neutrality.
Kaori Chiba
Yes, I understand. Thank you.
Ikuko Hongou
Next question, please. Mitsubishi UFJ Morgan Stanley Securities, Tanaka-san. Unmute yourself and raise your questions please.
Hideaki Tanaka
Tanaka, speaking. Can you hear me?
Ikuko Hongou
Yes, we can hear you.
Hideaki Tanaka
Thank you. Two questions. One by one. First Business Services segment profits. I've heard that they have been steady, but three months, the third quarter rate of increased profit, 4% and the margin seems to be deteriorating year-on-year because the revenue increase rate was higher, so margin is deteriorating, I think. What are the factors behind this? In relation to this, unexpected the impact from the higher fuel cost, ¥20 billion year. Now Personal and Business Services segment and what about the quarter movement in the quarter, I think that it might be relevant, if I may add fourth quarter and beyond. You are talking about accumulating projects or undertakings, but existing business, core business is the bulky part. So, there was a cost due to the communication failure. So, my impression is the hurdle is high. What do you think?
Ikuko Hongou
Mr. Mori, please.
Keiichi Mori
First about income profitability, you mentioned the growth in the previous year. For each term, quarter-on-quarter versus previous year, first quarter, second quarter, third quarter, it's been going up. And concerning the third quarter revenues 8.9%, income 8.4%. In terms of profit, there was this communication failure. And excluding communication failure and fuel cost hikes. So, by doing this sequentially, we can improve this further.
Regarding the fourth quarter target, hurdle has been raised. As for the accumulation, the monthly -- what we have in KPI is what we can acquire monthly and that's higher than the plan. So, by continuing this pace, the target as a kind of an area we would like to achieve the plan. The target has been raised, but currently what we are doing is higher than the plan, especially the new areas in the Next Core. They are enjoying good growth.
Hideaki Tanaka
Rather than Q-on-Q, it's a simple thing. October to December, three months rate of increase in terms of profitability, that's 4%. In the first half, there is a communication failure cost on the 3G closure had an impact, but the growth rate is not so brisk. I think there is a perhaps impact from the few or cost hikes. Am I correct in assuming those? The personal business, how much was that and in Q3, what was it like? That would really clarify my questions.
Shinichi Muramoto
Muramoto speaking. Cumulatively, until the third quarter, communication failure, the fuel cost hikes are excluded ¥150.9 billion. That's support the Business Services segment year-on-year plus ¥8.4 billion, 5.9% growth until the third quarter cumulatively. Now third quarter, single quarter Y-on-Y year-on-year as Mori mentioned, a little more than 8% growth has been achieved. Profitability, excluding the fuel cost hikes cumulatively into the third quarter, almost comparable to the previous year, 18.7%.
Hideaki Tanaka
Understood. Thank you. My second question value added ARPU. Page 12 please. Page 12. Thank you so much for this information. Electricity ARPU. Thank you ARPU. Thank you for giving us this information.
Shinichi Muramoto
Value added ARPU, increased by ¥37 billion and ¥32 billion and plus ¥5 billion.
Hideaki Tanaka
Of course, it's in the positive territory, which is good, but what's the breakdown? I would like to know the breakdown and about the payment or settlement, the amount of settlement or the transaction volume in terms of growth rate it's become -- it's losing momentum. What about the out outlook going forward, please?
Ikuko Hongou
Amamiya-san, please.
Toshitake Amamiya
Value added ARPU, as you pointed out, concerning commerce, slight decrease, but other than that they enjoyed growth. It's kind of a universal growth, first product support ARPU, ARPU fee increased and also other support. We are doing many things. They increased revenues and finance and that the settlement, the revenues increased, also smart, fast premium numbers -- members increased. They all have a positive impact and we enjoy this much growth going forward as well. We've like increase them steadily.
Hideaki Tanaka
Thank you. So, in terms of in terms of momentum settlement. In terms of momentum, what about the content on settlement?
Toshitake Amamiya
It's not that which is strong university. They are enjoying growth.
Hideaki Tanaka
Understood. Thank you.
Ikuko Hongou
We will take the next question BofA Securities, Kinoshita-san, please unmute yourself and ask the question.
Yoshiyuki Kinoshita
Hello, this is Kinoshita speaking.
Ikuko Hongou
Yes, we can hear you.
Yoshiyuki Kinoshita
So, I have two questions. For this fiscal year, you are aiming for increased profit, higher profit, but with the communications failure and energy, these unexpected events, if you to absorb these events and achieve the target may seem a bit difficult. So, it's not that you are aiming for to achieve the company's plan. Could you elaborate on the message? You may reach the target or not. What is your feeling? That's my first question.
Unidentified Company Representative
A very straightforward question. In Q2, we sent out a similar message. So, the negative factors for the full year was specified, so about ¥20 billion of fuel cost hike, negative impact. This is a very big impact and difficult to recover. As of Q2 and energy business towards Q3 and Q4, we thought we can make a recovery we thought in Q2, but now it seems more difficult. Energy business is now facing a downside. So, this difficult factor has added on -- for over 20 years we have been increasing our profit year on years, so we want to continue this track record. Thank you.
Yoshiyuki Kinoshita
Second question. This is not relevant to the financial performance, but in 5G network slice, you are starting to operate network slice. Then corporate demand can go up one step in your business. Do you have a specific timing internally? If so, we want to know by when this can become a business, when you can launch this business?
Ikuko Hongou
So, this is corporate business. So, Mori-san.
Keiichi Mori
So 5G, as a standalone using slice, network slice. We are starting to launch a few. We are developing with our customers. And we need to increase this. To do that 5G SA, the area where we can offer 5G SA need to be expanded. These two need to go in parallel. The big demand will come next fiscal year, around the middle of next fiscal year. By then -- until then, we are preparing and announcing some. So, we need to follow through and also deploy horizon horizontally. So that is the order we are thinking of.
Yoshiyuki Kinoshita
Thank you. Follow up question. So, overall, when you slice it, you have to make sure it will not disadvantage the general users. So, with MIC, The ministry, I hear that you are coordinating with MIC. Is there any issue there?
Keiichi Mori
No, not so far. But going forward, want the technology side to also add some comments.
Unidentified Company Representative
So, right now, by slicing, no issue so far, but as Mori-san just said, when we slice, the prioritized control, we have to avoid the impact. So, we need to control the area. So that's another point that we need to address.
Yoshiyuki Kinoshita
Thank you very much.
Ikuko Hongou
Next Daiwa Securities, Ando-san. If you have the follow up question, please tap the unmute button.
Yoshio Ando
Daiwa Securities, Ando. Can you hear me?
Ikuko Hongou
Yes, sir.
Yoshio Ando
Zoom froze, sir. Sorry about that. My additional question about CapEx, outlook for your CapEx. Materials cost increased. I think that's one factor. And in the next fiscal year, there are projects that you must do and some -- and you perhaps manage that are those that are not urgent. All-in-all around the next fiscal year together with the environmental changes, what is the under -- your understanding for your CapEx? Thank you.
Ikuko Hongou
It's related CapEx. Yoshimura-san, please.
Kazuyuki Yoshimura
Towards the next fiscal term and currently concerning 5G -- centering on the 5G, yes, we are making investment in the next fiscal term. Regarding the CapEx, last time we had to the response to the communication failure. So, this is about ¥50 billion including the CapEx. So, including that about the policy for the next term, CapEx sales 12%, no changes from the previous ones in the mid to long term we'd like to control them.
Yoshio Ando
Thank you.
Ikuko Hongou
So, next question is the SBI Securities. Moriyuki-san, please unmute yourself.
Shinji Moriyuki
Yes. This is Moriyuki from SBI Securities. I have a question on page seven, the profit forecast once again. So, negative factor. This is unexpected. Few tens of billions of yen. In energy business, it's not mentioned here because the amount is not that large. How much is that, please?
Ikuko Hongou
Right. We are not specific about that. It is not something we can disclose, but not as big. You are right.
Shinji Moriyuki
So roaming revenue, it will be the shortfall of ¥11 billion. And then with telecommunications, you will absorb. And the other areas cost reduction. Offset with cost reduction.
Ikuko Hongou
Yes, you can guess, but this roaming revenue from third quarter, the negative is becoming bigger.
Shinji Moriyuki
Will this pace become full scale or, what do you project as the future direction?
Ikuko Hongou
In Q3 ¥20 billion. The reduction decreases ¥20 billion. Initially we expected ¥50 billion, but it's at this level. Fourth quarter, the trend will continue at this pace. But compared to Q1, Q2, the third quarter negative is bigger. Well, yes, naturally, of course, because the roaming area will decrease -- shrink.
Shinji Moriyuki
Understood. Next page 11, multi-brand ID, UQ mobile, new subscription au ratio is now declining. On the other hand, you said switching cost is lower, and so the mobility is now rising. So, until now, au shifted to UQ, but now going to other carriers and UQ is recovering that. And that is why the ratio is lowering. Can you see it that way?
So the decline in internally, but it went outside and the shortfall was regained by UQ and that's why the ratio is lower. What is the reason the ratio is lower now? Is it because the volume zone has shifted? If you could elaborate please.
Ikuko Hongou
So shift from au to UQ is slowing down. How we see the background, the reasons for that with the rise in churn, this is happening. So, I thought that that can be a one interpretation. But if the -- that move have already moved then. Yes, Amamiya-san.
Toshitake Amamiya
What you just said is a difficult part. We don't know how much people who were supposed to go outside are captured by UQ or the ones who were not planning to go to other carriers are shifting to UQ. How we see this is very difficult. But looking at the overall balance au -- the outflow from au is not that large and shift to UQ is declining. So, we're looking at various indicators to judge, but we are trying to reduce the churn and also reducing the outflow to other carriers. We think we're successful doing that.
Shinji Moriyuki
So, the churn is rising now. Is it because of au or because of UQ? Which churn is rising?
Toshitake Amamiya
That is not disclosed, but I cannot have the number at hand. Both are about the same.
Shinji Moriyuki
I see. Not that different. On the other hand, positive factors, UQ to au, is now becoming more prominent or how do you see this movement?
Toshitake Amamiya
It is increasing. In Q3, this trend became more conspicuous. So from au to UQ and UQ to au, the gap is now becoming smaller. So, page 11, this line graph. So, this is a reverse correlation.
Shinji Moriyuki
Yes. Yes. Thank you very much.
End of Q&A
Ikuko Hongou
Thank you for your questions. It is about time. If you -- there was no person who wanted to raise a question. So with this, we would like to conclude this meeting with the business results of the third quarter of the fiscal year ending March, 2023 of KDDI Corporation. Thank you so much for your participation today.
For further details see:
KDDI Corporation (KDDIY) Q3 2022 Earnings Call Transcript