Thank you very much for waiting. We would like to start SoftBank Corporation Earnings Results Presentation for the Six Months Ended September 30, 2024. We would like to introduce today's attendees SoftBank Corporation, President and CEO, Miyakawa, Board Director, Executive Vice President and CFO, Fujihara. Today's presentation will be broadcast over the Internet. Now President and CEO, Miyakawa will give an overview of SoftBank consolidated financial results, and business overview.

I am Miyakawa from SoftBank. Thank you so much for your attending today. So over the weekend after the weekend, so this is the first day after the weekend. And thank you so much for taking time out of your busy schedule. Please bear with us for an hour or so. So now the second quarter earnings have been settled, I would like to explain the results. The revenue was ¥3,152.1 billion, up 7% from the previous year. Revenue exceeded ¥ 3 trillion for the very first time in the first half of the fiscal year, making it the highest ever. As shown here, revenues increased in all businesses, in particular enterprise, distribution and financial businesses. These three businesses grew at double-digit rates. Operating income was ¥585.9 billion up 14%. As for operating income, all businesses reported an increase in profits in addition to double-digit gains in the enterprise, media, EC and distribution businesses, the financial business turned positive. Net income increased 7% to ¥323.9 billion. The consolidated financial summary is as shown here

the results show an increase in both revenue and income. The progress rate for both operating income and net income was 65%, which we consider to be very solid. As the progress by segment shows that all segments are progressing well. However, the financial business in particular with 453% of the total is far ahead of the forecast made at the beginning of the fiscal year. In light of these strong results, we have decided to upwardly revise our full year forecast for fiscal year 2024. We have revised our operating income upward by 6%. We have also upwardly revised revenue and net income as well. Consumer business continues to grow, and lines various problems have settled down. PayPay, which had been in the red, has turned to the black. The challenges that had been confronting us are now being resolved one-by-one, and we are seeing a completely different landscape from last year. We will continue to work hard in the second half of the year, to further improve our business performance. The current medium term management plan is the second phase of a roadmap, to realize our long-term vision in this yellow one, and thankfully we are making progress toward our staged goals ahead of schedule - stated goals. I will now explain our business performance by segment. A first consumer business revenue was ¥1,426.9 billion up 3%. Mobile revenue also increased by ¥12.2 billion. A semiannual look at the year-on-year comparison of mobile revenue shows, gradual recovery since fiscal year 2021 when the impact of price reduction began, and since the second half of fiscal year 2023, have been on a continuous upward trend. Operating income was ¥322 billion up 4%. The number of smartphone subscribers grew steadily, increasing 4%. This is something new for you. This graph shows the balance of migration between SoftBank brand and Y!mobile brands? So if there is a large number of migration from SoftBank to Y!mobile, from the perspective of the SoftBank brand, the color is in red zone and conversely, if there is a large number of migration from Y!mobile to SoftBank brand, the color is blue. As a result of the mobile service price reductions, Y!mobile's price range became the main source of competition, which led to active migration of price sensitive customers from the SoftBank brand to Y!mobile. As a result of our focus on segregation of the SoftBank and Y!mobile brands, and the growing reputation of our Pay-toku plan, the number of customers shifting to SoftBank brand is gradually increasing. We will pursue this trend in the future. Considering the competition, we would like to refrain from showing this slide every quarter. However, I wanted to emphasize here is that as you can see that we have changed our business management structure, so that we are not only chasing net growth. Next, I would like to brief on the Enterprise business. Revenue was ¥445.8 billion up 11% at approximately ¥450 billion per half year. Enterprise revenue of ¥1 trillion per year are in sight. For this factor, solutions continued to perform well, increasing 28%. Operating income was ¥94.4 billion, up 12%. Next, I will explain the Distribution business. We've usually omitted an explanation of the distribution business. However, since it has started to grow gradually, I would like to add an explanation this time. Revenue was ¥430.7 billion, up 44%. Especially revenues from AI servers, are doing well and sales to external customers have increased fivefold. As society begins to coexist with AI, we have trained - we have trained many AI engineers to have the technical skills to build AI servers. As you can see, C&S, a wholly-owned subsidiary, is doing business with major AI server companies. In addition, they are in charge of building AI servers, for the next generation social infrastructure data center that we are promoting, which when included has led to a significant increase in sales of AI servers. Currently, we are mainly building for internal use, due to the shortage of GPUs, but we have accumulated know-how in building systems, and once the supply of GPU is stable, we'll be able to respond to external demand. We expect this segment to grow further in the future, as the demand for AI expands in Japan. Operating income was ¥16.2 billion, up 20%. So the Distribution business may give the impression, of just buying and selling PCs and peripheral equipment, but we've successfully changed our business model by introducing subscriptions. Recently, projects for Enterprise, SB Technology, LINE, Yahoo! PayPay and so on have been increasingly attended by C&S. We believe that the value of C&S has been enhanced beyond the distribution framework through the cooperation within the group. Next Media & EC Business. I will keep it simple. [Simp Lai Nyahu] already announced its financial results on Tuesday. Revenue went up by 5% to ¥813.4 billion. In media space where profit margin is high, we saw its growth by 4%. Thanks to steady growth of Media business and one-time valuation gain, operating profit grew by 40%. Even excluding the one-time event, we saw 16% of growth. Next Financial business, revenue went up by 19% to ¥129.8 billion. Operating income was ¥13.6 billion. This significant improvement was driven by now profitable PayPay. Talking about PayPay, its consolidated revenue went up by 17% to ¥116.5 billion. PayPay's GMV showed steady growth up by 22% to ¥7.2 trillion. Consolidated EBITDA was ¥19.6 billion, staying profitable for two consecutive years. Operating income was also positive for two quarters in a row. SB Payment Services GMV was ¥4.6 trillion up by 22% year-on-year. Non-telecom domain grew 27%, and operating income showed steady performance. Now let me give you updates on our Retail shareholders. I thought that we should explain further, right after the share split. On April 25, this year we announced that a one to 10 share split, which was executed on October 1. Since the announcement, the number of our retail shareholders, which had been on the declining trend was turning positive and reached over 1 million, as of the end of September before the share split. One of our intentions to do share split, was to increase percentage of younger shareholders, who would look at our business with a long-term view over 10 to 20 years of horizon. As intended, the proportion of our shareholders at the age of 40 or younger has increased from 27% to 34%. With our shareholder benefit program, we expect the percentage of young shareholders will go up even further. I'd like to also update you on our efforts of building next generation social infrastructure. We are putting multiple AI data centers across Japan, to build next generation social infrastructure. Today, I'd like to share with you progress on AI computing platform. Since the end of October, our new AI computing platform, powered by NVIDIA's 800, has been up and running. The number of GPU on the platform increased to 6,000 to deliver five times better performance, which makes it one of the biggest AI platforms in Japan. We plan to increase the GPU count to 10,000 sometime in the first half of next fiscal year. We have built Homegrown LLM with 460 billion parameters, and made it available for research and development. In fact, we made it available today. We will accelerate training the model with an aim for commercial launch by the end of next fiscal year. To solidify our financial foundation to support such investment for growth, we issued Series 2 Corporate Bond Type Class shares. The shares were listed on TSE prime market on October 4, with a total amount of ¥200 billion as planned and fixed annual dividend rate at 3.2%. We plan to use the proceeds for mid and long-term growth investment. We strive for becoming a market leader in the era of generative AI, by actively investing for growth. To summarize today's presentation. First, all segments showed strong performance with growth in both revenue and profit. Second, we decided to upgrade full year forecast supported by steady performance. Operating income forecast was raised by 6%. Third, PayPay recorded operating profit for the two consecutive terms. And last, but not the least, we keep working on building next generation social infrastructure, leveraging our expanded AI computing platform. SoftBank continues to strive for its corporate vision of information revolution. Happiness for everyone. Thank you very much for your kind attention today.

Thank you. [Operator Instructions]

I am Ishino Freelancer. Two questions first is about [Docomo Ahoba] increased up to 30 giga. And I'm sure the SoftBank is also competing against that. So what is your perspective for that? That's my first question.

So, should I answer one-by-one?

And my next second question is about the Ministry of Information and Communication and MIC has announced the guidance to change the limit of the purchase of used handsets. So do you have any countermeasures against that?

To answer to your first question about Ahamo's 30 giga. So we completely renewed Y!mobile and LINEMO prices and we were considering whether to take an action or not. But we did, so our price range in the market we were able to maintain the competitiveness and after October 1, it's been stable I would say. But I believe that extreme price reduction when you look at in a long-term perspective, I don't think it's a good thing to do. We intended to take action, but well, if one of us takes some action, then we also have to do something against that. However, everything is the price is going up, while the mobile service price is going down. And we need to seriously look at this situation as our industry as a whole. So we hope that this market will go to the situation, where that we can also naturally increase the price along with the market situation. So about the handset discount, we don't think that there will be any major impact on us. We do have different plans like Tokusapo. We have taken different measures, honestly speaking. Well, one unit of device is more than ¥200,000 or ¥300,000 or even more. It's getting more and more expensive. So ¥15,000 per unit. That kind of discussion is not relevant, to what actually the market is. So the mobile device price has drastically changed. So when we see this kind of big change in the mobile device price, then we should also see from the different perspective. This is my personal opinion. Thank you.

Next question. Ono from Yomiuri Newspaper.

I have two questions. First, about the business performance among three carriers. You are the only one that reported both revenue growth, and the profit growth. Especially in consumer sector. The progress is over 60% against the forecast. So I wonder how much consumer business, contributed to the business performance. Second question, NTT recently announced a partnership with Toyota in the space of mobility. You worked with Toyota in the area of Monat. So automobile sector and IoT initiatives and those areas are more and more competitive. So if you could share your view around that, please? Thank you.

First, about the consumer's business and contribution to our good performance. Consumer business of course, is one of our main businesses and once consumer business goes down, the company as a whole goes down. On the other hand, the consumer business goes well, the company overall goes well. In the mid long-term, enterprise, media, EC, financial our businesses will grow gradually one-by-one, and we try not to depend too much on consumer business going forward. But the moment, in the short-term, consumers play a big part in our business performance. And the consumer business, is now on the upward trend, which is exciting and our sales teams are actively - our striding into new sectors. So without consumer business, the SoftBank KDDI doesn't exist. So consumer business still is an engine for our growth. Next question. About NTT and Toyota, right?

Yes.

In fact, as KDDI I mentioned right before the announcement, I got a call and briefed by them and I think the partnership is good, and we are open to join the team if we were asked, that's what I actually said to them. Sell our V2X, which we are working on and AI to support autonomous driving. I love these areas, and we are deeply involved in research. Especially recently AI ran - and MIC so we are working on element technology development. So whenever there is an opportunity, of course we try to help realizing zero free traffic in Japan, and also we want to help mitigating traffic congestion. And also AI and virtual and digital team is something that we are. We have been working on, so we love to take any opportunity given.

I am Sekiguchi from Kate Watch. One question AI initiative for consumer - I would like to hear from you?

Last week Rakuten Mobile announced a new service of AI chat, and to expand it to the new ecosystem. So SoftBank also announced the collaboration with Perplexity we would like to hear, what's the status of the Perplexity. And so, the enterprise DX is going to utilize mainly leveraging the new computing infrastructure platform, but you have a plan to expand it to the consumer level. Regarding Perplexity is being well accepted, and being used quite widely. And I also use it almost every day, while using it and it also gives you where the source is. And it is easier for us to ask the next questions, which I believe it's a very interesting AI and useful AI. So why we distributed Perplexity service free of charge, is that we want people to feel that AI is our alliance, not the enemies. That's why we decided to distribute and offer the free of charge use and 4800 parameters. The generative AI – generated, you pointed out. So we also like to make it as one of the GenAI Tubus. Of course we cannot suddenly become competitive enough against OpenAI for oil. But as like Ramesh of Meta 400 million parameters, is something that Japan could also make it happen. We wanted to prove that, because we are Japanese company or we are in Japan, it is not possible to generate Gen AI. So we wanted to prove that we are not inferior to America. So it took us quite time. But next fiscal year and onwards, as we plan to enhance establishing AI base and we would like to scale up, and how this could be leveraged by people in Japan, we would like to further well consider. As for consumer and how we are going to expand it to the consumer level, is what we believe is that the Apple intelligence or Geni is something that device maker might take initiatives and OpenAI search - service has also begun. So in many different ways AI would be utilized. But as our responsibility we would like to prepare the environment. AI could be used anywhere. So, we have no intention to force people to utilize AI we are making, but to let them know and give them opportunities to find out that AI is something they can get along with.

Thank you. Next question from the floor.

My name is Miyoshi from NHK. First, about the data center. I'm sure that you have a plan to convert a part of Sharp Sakai factory to your data center. Could you give us some progress? And second, Mr. Trump is likely to become the next President of the United States, and we don't know his policy at all. But what do you think potential impact on your business or business performance?

The first about the Sakai data center for our final conclusion of agreement, we are still discussing with the other party. As things go well by the end of year, we hope that everything will be concluded, whether the factory can be used for data center, which had been a big challenge, but Sakai local government help us to address that challenge. And also a lot of wiring is necessary of course. And we try to sort out the things that can be touched, things that cannot be touched, because of some chemical material. So again we are still working on that. About the U.S. President about politics in general, I would love to refrain from making any comment. That said, personally I wish I could see the first female President, but the result of election I don't think should have an impact on our business. I hope that U.S. politics will be stabilized, and try addressing social and geopolitical issues.

Masta [ph] from Nikkei Newspapers. One question about the price plan Ahamo and the SoftBank plans and also Rakuten expanded it's the number of subscribers. So what do you see what's happening around the price plans by different carriers?

So regarding the price plan before Ahamo was Rakuten, of course there is a question that is there any impact on us, but we don't see any major impact yet, but for Ahamo. So I asked what's happening. And so there was no majors taken by only SoftBank against Ahamo. So when we look at mid and long-term plan, then the device itself would not have major change. So and the regular subscribers, the number of regular subscribers, would be stable without no major change. So rather than spending on unnecessary or excessive customer acquisition cost, we would like to focus on shifting the users more towards the SoftBank brand. So we would like to restructure from the mid and long-term perspectives.

Any other question from the floor?

Sugiyama from Nikkei Business Two questions, first, about the PayPay, which is growing well, I think growth is better than expected. So what do you think? Why is it going well? And also IPO's expectation how are you going to grow PayPay business further? The second about quality of your mobile service. SoftBank has been recognized well and ranked high in the competitive run comparison as KDDI mentioned in their financial announcement like number of sub6 cell sites, and there might be some difference between competitors and you. So what are you going to do to improve the quality of the mobile connection?

So I wish that somebody asked that second question. Thank you for asking the question. But anyway, PayPay first, I think recognition of PayPay it went up, that's a big thing. And merchants still are growing in terms of the number. So PayPay is, I think becoming well received by the society in general about IPO, we are not rushed and they are not rushed either at some point. I think they will make a decision. So we will see how things go. So that's the current situation. Fujihara-san, anything you want to add about PayPay?

PayPay's revenue is better than expected. I think the growth is around 20%, but on top of that expenses have been well managed. So I think that's part of the reason why PayPay is going well. And the second question about the network quality, I asked our team why we are now inferior to others. And I think one thing is, KDDI has been working on improving the network quality, which I think pays off. So number one at the moment is KDDI. I think - that's a fair judgment. But the fact of the matter, or excuse if I may is there was an earthquake and as of end of January we plan to discontinue 3G, but we extended our schedule to the end of April in some areas, and even further to end of July in other areas. So that kind of a six month delay of 3G sunset, if you will, resulted in reconfiguration - delayed reconfiguration of the network. But now that reconfiguration was finished. So by the end of December, we like to turn things around, and I'm sure that our team is working on harder, to improve the network quality.

Ishikawa Freelancer [ph] so regarding the network quality you talked about, so 4.9 giga should be acquired, but it will take some time. So how you are going to work around network quality improvement, and how you're going to work around utilizing some costs?

So regarding the quality of network, the spectrum used for S-3G originally and LTE, and so, we are trying to do antenna tuning and so on. And then - without converting 3G to LTE. So now we have switched to LTE, and that will be completed by the end of November and December onwards. So the foundation design will be ready. So therefore we should be able to have some sort of the result by the end of December. So how is something that we cannot disclose everything, but make it short. We will make PayTalk more attractive by doing so. The migration from Y!mobile to SoftBank brands for set users unlimited capacity is one major factor, and also those who use PayPay often. And by using PayPay more than they can get more discount as a whole. So considering these two factors, we also like to enhance PayTalk attractiveness by when you're going to do so? I can't tell you that right now. Thank you.

Next question please.

Hatani [ph] from Newspeak. Just one question talking about PayPay in October. I think PayPay has been six years. So looking back, what do you think what kind of role PayPay has been playing in SoftBank as a whole?

PayPay for SoftBank Group, SoftBank PayPay and LINE, Yahoo! Well, SoftBank Group, SoftBank PayPay and LINE, Yahoo! decided to work together to launch PayPay and there were a lot of advanced businesses, payment businesses that we wanted to compete against them. And Mr. San of SoftBank took a lead, and we supported him to launch PayPay business. We started from scratch and launched a service. I think that was the first experience as a group companies to work together. In the past maybe we have launched joint venture with third-parties, or third-party businesses, but only using groups assets and groups money. We started the business, and our effort paid off. So me personally going forward the initiative was meaningful for the SoftBank Group to drive a business force. I think - new businesses will be founded continuously. So I think PayPay was the first example of group wide effort to start a new business. And we show a great example to other group companies now.

Abhi [ph] from Asahi Newspapers. I have two questions. One, it's about Rapidus the semiconductor manufacturers so we learned that they were asking for additional capital investment. So what is your position? And also right now the government is also supporting in terms of funding. So they have some challenges, what do you see about the challenges Rapidus has? And the second question is that, the result of the U.S. Presidential election? So what do you see that the challenges ahead with the new President of the U.S.

So about Rapidus, it is true that we announced the intention for the additional capital investment. However we cannot disclose exact amount, looking at this situation of the supply chain. So the Japanese government wants to manufacture and secure enough supply for semiconductors used domestically. So which I agree upon. So I would like to do as much as possible. However, this is not our main business area. Therefore we have limit. We have a certain limit, to where we can invest. Yes, it is true that we announced our intention and we would like to continue supporting it. Yes, there are a lot of challenges ahead. App 2 manufacturing semiconductor is not a goal of this, but how it going to be reselling is the thing. So this kind of business can be handled by those who are affluent in capital, or those who are in big need, or those who are good at doing this. Otherwise it wouldn't succeed. So as we discussed internally about additional investment as you know, who would be the one to scold me, and there was a severe discussion between us. Chicken or egg is always something that comes between us. So especially for semiconductors, once you make it, how you're going to sell. So that is something you have to really consider. And they are making a factory, which can have enough capacity to be competitive enough as others. So but it's not that level yet. So just for - we have been giving some suggestions, what should be a better idea to do. So I believe that it's better to do, rather than not doing it. So we should challenge it, and by doing so and we see some sort of the result, and we can come up with the next step idea. So as a part of one shareholder we would like to be any help to you. So the second question about the result of the Presidential Election of the United States as I mentioned earlier, I don't believe that we would have any impact on our business as a core. But our customers like automobile companies or pharmaceutical companies. So if they are imposed like 20% of tariff also the impact of the exchange rate then our customers' situation would be largely impact. So I do hope that bilateral relationship would go smoother. Thank you.

In the interest time, we would like to take one final question from the floor.

Nagata [ph] from Nikkei Cross Tech. Just one question. Yesterday KDD announced [TOB of RAC]. So security business KDDI seems to want to enhance or strengthen. What do you think?

So I didn't know about the RAC's TOB and I think SoftBank technology was listed in our case, and I think intention of KDDI is similar. I assume security in general, is going to be more and more important and we also want to strengthen security team, and security capability. So that's why we wanted to have SoftBank technology working together. So I think the intention of KDDI will be the same.

So we would like to take questions from Zoom. [Operator Instructions] SMBC, Nikko Securities, Kikuchi-san, please unmute and ask your questions, please.

Thank you for this opportunity. Thank you for your presentation. So you upwardly revised the forecast. So we also expected that to happen, and I also had expected that and how you're going to perform moving forward. And then you have incremental advanced investment, and how you're going to shift your direction?

So let me answer one-by-one. So as you mentioned, how we are going to control, we do not really control. We want to be as natural as possible as you as we go. And so, we believe that the result would come up as we continue to perform. So the next fiscal year ¥970 billion and that your target, you are getting closer to the target already set. And so, what is your expectation for the next fiscal year? So this fiscal year I don't think we will achieve ¥970 billion, but we would like to also invest on generative AI related things. So if we land at ¥970 billion, then we may lose, we may disappoint your expectations. So we would like to also exceed that next fiscal year.

Second question. So from the stock market perspective, you are consolidating the result. Not only you, but other subsidiaries of yours who are listed or trying to do IPO like PayPay. And so, the companies or subsidiaries which are not going to be listed of yours. So how you're going to control and also the profit, which do not belong to the company is increasing, and also the profit that belongs to the company how you're going to improve that, or increase that and for now I see that enterprise business is growing, but how. How far this enterprise business would grow is, and then how this can keep its momentum is being answered by you already like establishing the AI computing platform and so on or data center, but if you could elaborate on your thoughts around that would be great?

I hope that I could put everything together, and then give you the better explanation in the next general shareholders meeting or so in the next year. However, make it to the point the revenues of - revenues due to the communication is - I think is limited. So the other areas we have been investing and especially the software development, even though we tried to reduce costs. And we worked really hard to enhance the software development, so we hope that you would see how it grows moving forward. This is not a right time for us to give you further explanation. So I hope you said software, there are many kinds of software what kind of software you are talking about? Those are related to a data center or AI RAN related and softwares for those related hardware.

Thank you for your explanation.

Next, Masuno-san from Nomura Securities. Please unmute and speak.

Two questions first about the consumer business to be honest competitive pricing plan against, I think is seems soft and Miyakawa-san it doesn't really care too much about net add is very - it is some point, but again are you sending signal to the industry is that you should not be too competitive. I don't know my message is going to be erased, but I think if it's too competitive I think it would be a negative impact on the industry. Second, investment in a growing areas, I think I hope personally that better to build healthy negative results or LLM, I take a look at LLM and I think a 70 billion parameter expert model should be combined, or it's not commercial and Sakai data center is still behind the schedule although it's out of your control and the B200 is delayed in supply or delivery. So I think in general everything is slowing or you are left behind. So I think you better invest and even though you may suffer loss first, but then see the turnaround later would be better I think and I wonder if that will be possible in the next year? Thank you.

I think it's not easy to make that happen next year, because for example Sharp Sakai factory we hope that the factory will be up and running sometime next year, but it's highly likely one year late. And as far as NVIDIA's B200 I think it's only a few months delay, we should get our supply next year. So I think it's going well and NVIDIA promised that we would be the first one to receive B200 in the world. I hope that will be the case. About CapEx, you mentioned that investment in research and development seemed small this year, especially around AI. In fact we had some sandbags or buffers so I don't think that we are too left behind. Maybe Fujihara-san wants to say something

Like Masuno-san said in the first fiscal year number was relatively small, but last half it's not going to be big difference, but last half year would be better. Maybe it's smaller is better. Masuno-san, did we answer your question?

Yes.

Due to time constraints, we will take questions from one more person. Tokunaga san from Daiwa Securities. Please unmute and ask your questions, please.

I have two questions. One that you said that you are not chasing only net additions, but so you were going to shift it to another KPI, not just net additions. So which direction you are heading to as KPI. And so, it may be too early to ask you, but what is your direction heading to?

So even, it's not that we don't pursue net additions, but I mean that it's not the only thing that we pursue. So on the field it would exceed the initial KPI, and next fiscal year onwards of course we would target 1 million, but if the market is stagnant then we are not going to really open the new door, but we would like to focus on ARPU improvement. So we don't want to spend excessive cost on customer acquisition, but we would like to spend on something different.

So are you talking about the second half of this fiscal year or?

Yes, there will be different measures will be taken.

Thank you. My last question. You are doing the AI servers externally, which is a great news. So what kind of demand do you have?

Yes, we have those who are sensitive to generative AI, and which the companies they are trying to use AI internally in-house. So as we listen to the requests from different companies, and once they have more understanding of gen AI, they would like to purchase more. So if we consider those as our pipelines, then there will be a big scale.

Thank you.

Thank you very much. That's all for the question-and-answer session. Now we'd like to conclude SoftBank's earning results announcement for the six months ended September 30, 2024. This presentation will be distributed on demand on our corporate website. Once again, thank you very much for joining us. Announcing earnings results for the six month ended September 30, 2024.