KDDI Corporation (9433) Earnings Call Transcript & Summary

Thank you very much for waiting. Let us start the financial results briefing for KDDI Corporation for the fiscal year ended March 2020. Thank you very much for taking time out of your busy schedule to attend this briefing online. I am [ Honggu ] from IR Department, and I will serve as the moderator. This briefing is live-streamed with Japanese/English simultaneous interpretation to prevent the spread of coronavirus. The material for the briefing will be distributed on-demand on our company IR website later. I would like to ask you for your understanding. Let me introduce the participants today. To your left, in the front row from the center, Takahashi, President and Representative Director; Muramoto, SMEO, Senior Managing Executive Officer, Director and Executive Director of Corporate Sector. Next, to your right in the front row from the center, Shoji, SMEO and Director and Executive Director of Personal Business; Mori, SMEO and Director and Executive Director of Solutions Business sector. Next to your right, in the back row from the center, Morita, Managing Executive Director, Officer, Director and General Manager of Business and Services Development Division; Amamiya, Managing Executive Officer, Director and General Manager of Personal Business Planning Division. Lastly, to your left in the back row from the center, Yoshimura, Executive Officer in Charge of Technology Sector; Saishoji, Executive Officer and General Manager of Corporate Management Division. Today, 3 financial results-related materials: presentation, financial statement, and detailed material; and 3 TSE disclosure material, total of 6 materials, are posted on our IR website. Please refer to the disclosure in the materials regarding the statements made in these documents, performance targets and projected subscriber numbers, et cetera, explained in the Q&A session today. First, President Takahashi will explain the financial results, followed by Q&A. President Takahashi, please.

Thank you. Thank you very much for watching KDDI meeting on our financial results out of your very busy schedules. I'd like to share with you the financial results for the fiscal year ended March 2020. Allow me to express my condolences to those who passed away owing to the COVID-19 and convey my heartfelt sympathy to those who contracted disease and all of you for experiencing a difficult time with anxiety. I'm grateful to those of you who have been working hard to prevent the spread of the disease. We are fulfilling our responsibility as a telecommunications company while striving to prevent the spread of the COVID-19. First, allow me to give you some explanation. The first page, please. Let me explain our basic policy towards COVID-19. As a company, we wish to contribute to a sustainable growth of the society. KDDI's sustainable action has been devised as a goal towards 2030, based on which as a company that supports lifeline and life design, 5 policies have been established as the priorities. First, safety of our customers and employees; second, maintain telecommunication services; third, collaborate with governments and municipalities; fourth, construct a resilient social infrastructure by promoting digital transformation; and fifth, alleviate worries and difficulties in lives. Following the basic policies I've just shared with you, we've already implemented what's shown here on the screen. Not limiting to these, we will continue to contribute to the stability of our society and people's living through our businesses. Next, the highlights of financial results for the fiscal year 2020 March period. The left shows the consolidated operating revenues for the fiscal year ended March 2020 at JPY 5.2372 trillion, up 3.1% versus last year. The right is operating income, which was JPY 1.0252 trillion, up 1.1% against the last year. Both the revenue and the operating income were higher than beginning of the term forecast. We achieved increased revenue and income. Next, let me explain factors for an JPY 11.5 billion increase of the operating income. From the left, in life design domain, which is the growth domain, an increase of JPY 33 billion was achieved. In the business segment, JPY 25.4 billion growth was achieved. They continue to drive our performance. On the other hand, a change in the accounting period in Myanmar and 3G-accelerated depreciation and others resulted in a JPY 16.8 billion reduction with one-off factors. Others include au campaign-related expenses and the possible impairment due to the COVID-19. We'll be steadily making progress towards sustainable growth. Next on business strategies. As you can see, we aim to maximize group ID times engagement times total ARPU. We are once again centering on engagement in this term in promoting strategies. Engagement is about trusting relationships with our customers. If engagement is enhanced, our services will be used more frequently. As they are used longer, the churn rate improves, further increasing group ID and total ARPU. We're expanding businesses with a top priority on building trusting relationships with customers. Let me elaborate on the mechanism of enhancing engagement. Please look at the left. We have been making efforts to increase Net Promoter Score or NPS. The past few years' analysis shows a correlation between increased amount of contact and enhanced NPS, which has become clear. So to your right, our contact with customers. First, to start at au shops as an entry point to daily lives. We'd like them to fully utilize au PAY and the au PAY market with credit cards and e-commerce and adding au Denki and financial services, and we aim to be an indispensable entity for people's living. In this way, intend to expand customer contact. To enhance customer contact, we position au PAY at the center. If you could look at the left, as a result of a campaign in February and March this year, many non-au customers also used the service, significantly increasing au PAY awareness. The number of payments more than doubled. After the campaign ended, we have been promoting initiatives so that customer usage takes root. The number of payments continues to be on the increase now. If you could look at the right. Finally, from the end of this month, au WALLET points will be integrated with Ponta points, becoming one of the largest member base in Japan with more than 100 million members. We'll continue to promote an environment where many customers can use them. Next concerns strengthening ID base across the entire group. We are thinking of boosting the momentum in 3 phases to build a solid ID base. In the first phase, we use our group brand to stem the outflow from the group. In the second phase, we boost new acquisitions to the group from a fluid MVNO market. And in the third phase, we focused on the sales appeal of high-quality 5G communications and experience values to establish a cycle structure within our group by upselling to au to boost the momentum. To accelerate the group's strategies, UQ Mobile will be integrated to our company. UQ Mobile offers low-priced, high-quality services, and it has 2 million subscribers. The integration has 3 synergy effects. From the left, au and UQ Mobile reorganization and integration of sales organization and sales channels nationwide. And center, providing easy-to-understand and various services that meet the needs of customers by utilizing the features of both brands. On the right, streamlining the overlapping tasks and operations, enhancing the efficiency in administration, strengthening competitiveness by consolidating management resources. Next is about au 5G that started in March. To encourage transition or switch to 5G, we have measures in place for devices, prices and services. First, on devices or handsets. In addition to our flagship models, such as Galaxy and Xperia, we offer middle-ranged models like ZTE and Xiaomi, giving us a lineup of several models, which is the highest number in the industry. For some devices, up to JPY 22,000 discount and [ kayutoka ] programs are available at au online shops, making them affordable. Next, on 5G prices and services. For 5G, we offer unlimited data service at comparable prices with 4G. Furthermore, we are promoting switch by offering 5G-original plans. In addition to Netflix, YouTube Premium, Apple Music, TELASA video and music content will be incorporated under the ALL STAR plan, which will be [ started later than June ] this year. For au Smart Pass Premium, we provide augmented experience, aiming to upsell with new prices and experience values that really utilizes 5G. Next, based on what I've explained so far, I would like to focus on further expansion of the growth domain. First, by increasing customer contact, I said, we'd build strong engagement. This will lead to increased use of value-added services, shown in the blue arrow moving upwards in the center. For customers using telecommunications services by the group, by expanding value-added services, we aim to grow value-added ARPU in addition to communications. With switch to 5G and the resulting increase of data usage, we aim to grow telecommunications ARPU as well. On the bottom, further, if you could look at the orange arrow, we point down the other open basis, the -- as a foothold, we will utilize payments and points to further expand the growth domain. The last point on personal segment is the progress on medium-term targets in the growth areas. Life design domain sales was JPY 1.218 trillion and the progress rate was 49%. Transaction volume of settlement and loan was JPY 6.537 trillion with a progress rate of 134%. Thanks to the increase in total settlement volume in Jibun Bank and strong progress in au PAY settlement, we reached the medium-term target of JPY 6 trillion ahead of schedule. Next is the Business Services segment. Operating revenue is progressing steadily toward our medium-term target of JPY 1 trillion. We are promoting our customers' digital transformation, which is pushing the growth of, number one, core business that consists of the existing telecommunications business, and number two, new domains, which consists of IoT 5G business and domestic and overseas group companies. We will keep aiming to grow in both areas by promoting customer digital transformation. We are creating new values with our customers through DX, digital transformation. Let me introduce some concrete examples. With Hitachi Transport System, we are migrating their distribution center into 5G to realize the enhancement of safety, quality and productivity together. With San-Ai Oil, we pursued operational efficiency using telecommunications and AI and started offering KDDI gas platform services to contribute to the maximization of CS and CX of gas subscribers. Thus, we will contribute to the creation of a resilient foundation that is resistant to environmental changes. The last point on Business Services segment is the progress on medium-term targets. In the growth areas, operating revenue was JPY 923.5 billion and the progress rate was 33%. IoT cumulative connections is 11.5 million with a progress rate of 35%, which is ahead of the schedule to achieve the target of 18 million by the end of year ending March 2022. We will aim to expand the business on a global basis centered on IoT worldwide architecture as the core. Now let me talk about the consolidated financial forecast for fiscal year ending March 2021. Although the impact of COVID-19 that we can forecast at this moment has been included in our financial forecast, while we will carefully assess the future outlook, we will contribute to the stability of the society and lifestyles based on our basic policy toward COVID-19 and aim to achieve our financial forecast and medium-term management plan. Consolidated operating revenue for the fiscal year ending March 2021 is expected at JPY 5.250 trillion and operating income at JPY 1.030 trillion, which are both on par with the previous fiscal year's results, but we will keep aiming for our business growth. It may fluctuate depending on the COVID-19 situation, and we will ensure timely disclosure when we need to revise the forecast. We will promote our business strategies and work to strengthen our business foundation. Next is the review of medium-term management plan. We expect the operating revenue and operating income to be on par with the previous fiscal year's results, but our aim for mid- to long-term growth remains unchanged. We will keep aiming for both sustainable growth and strengthening of shareholder returns going forward. Next is KDDI's sustainable action. Last year, in the medium-term management plan, we announced SDGs that KDDI aim for in connection with our business strategies and corporate activities. This time, we are thinking longer-term up to 2030 and defined KDDI sustainable action. Our power to make connections will help create a brighter future for all as a target rooted in our business. We will promote our initiatives as a company contributing to the sustainable development of the society. Next is external recognition. We received awards in both innovation and sustainability. Left side, in innovation, major corporations ranking based on the questionnaire conducted by ILS, Innovation Leaders Summit Executive Committee and METI, we won the first place for 2 consecutive years. Right side in sustainability, we've been selected as component stock in FTSE and MSCI, the leading global indices on SRI, socially responsible investment, every year since 2017. We will continue aiming to be a company that can meet the expectations of the society. Toward a safe national life and economic recovery. As we take COVID-19 countermeasures and anticipate the phase beyond that, we will execute mainly 2 missions as a telecommunications operator in Japan. First point, we will expand and strengthen the network that underpin telework, online education and remote medical care and adapt leading-edge technologies that meet global standards to build a robust 5G network and promote infrastructure sharing with other companies and utilize base station lines of telecommunication companies to establish a domestic 2-axle diversity network. Secondly, in order to restore the slumping economic activities and achieve sustainable growth, digital transformation will be even more necessary. We will pursue collaboration with global OTTs and venture companies to capture new technologies and ideas and promote digital transformation with partners in various industries. We will continue making necessary CapEx for the Japanese society and work to realize Society 5.0 soon. Next is DPS, dividend per share. We focus on DPS growth with sustainable growth. Dividend for the fiscal year ending March 2021 is JPY 120. We will aim for 19 consecutive years of DPS growth. Based on what I've explained so far, let me touch on maximizing our corporate value. In the upper half, financials, we will promote our medium-term management plan and improve our profitability and efficiency. In the lower half, nonfinancial, we will take ESG- and SDG-related initiatives and promote a transformation toward a human-resources-first company. We will ensure long-term and stable return in both financial and nonfinancial areas through structural reform. This is the summary for today. Regarding medium-term management plan, we will aim for both sustainable growth and strengthening of shareholder return continuously and strengthen financial aspects through the expansion of growth areas in lean and mean management, and strengthen management base through efforts on nonfinancial aspects such as SDGs. Regarding financial results. For fiscal year ended March 2020, we achieved higher revenue and operating income and made steady progress towards sustainable growth. And for the year ending March 2021, we will absorb the environmental changes and business performance is expected to achieve the same level as the previous year. Regarding business strategies, we will enhance engagement by expanding customer contacts centering on au PAY and aim to grow in core business and new domain by promoting customer DX. We will promote initiatives for social stability and solid management. So we will do our very best. I would like to ask you for your support. Thank you very much for your attention.

Now we would like to entertain your questions. Please limit the number of questions to 2 per person to allow many of you to ask questions. If you have 2 questions, please wait for the answer to your first question and then state your second question, please. As you have been informed, from those of you who have already been registered and connected to the system, we would like to entertain your questions one after another. Allow me to explain about how to state your question. [Operator Instructions] The first question, Nomura Securities, Masuno-san.

Can you hear me?

Yes.

First question, this fiscal year's performance. You have a good outlook. It's an increase of dividend, and the policy has been clearly established, and you have already taken into consideration the effects of the COVID-19. But that means that you see some good positive factors to cover it. So there are negative effects from the COVID-19, but there are drivers for positive results. What are those positive drivers? That's my first question.

Thank you for your question. Takahashi speaking. Allow me to address your question. Regarding whether we should actually make an announcement for this year's results, we had a lot of discussion. We had difficulty in March and April to what extent should we incorporate COVID-19 impact. We had extensive discussion. Negative factors should be looked at first. Network traffic impact, what's the level of impact there? And in terms of sales, sales partners are most important to us, so how can we actually see recovery about the impact on those? We had extensive discussions on those. As for -- regarding the subsidiaries, not stock business, but the flow of recurrent type of business is done. For instance, Aeon, this is the English conversation school. They are offering classes in physical places. What about the impact on them? What about travel-related subsidiaries? We have such subsidiaries, there are some negative factors there. Regarding the corporate, it's difficult to make a prediction at the moment regarding corporate businesses. Our customers, some of them find themselves in a difficult environment. So such negative factors are being looked at. And still, sustainable growth can be made or not. We had a lot of discussions. And as a result, we believe that JPY 1.030 trillion outlook has been announced as a result of that work. April, May, we have still been discussing. But to see the recovery in terms of cost reduction, it's a great opportunity for cost structure reform. So by doing so, they're reducing costs. So that's one factor. And given the environment, demand from those nest dwellers, e-commerce has been on the great increase. And content market, that's also enjoying a lot of growth, and OTT bundled plan that has been accepted warmly. So those are positive factors. And in 5G, about 60% uses Data MAX, that's the unlimited data utilization. They preferred that price line -- price plan. So customers want such ease of mind. Regarding the corporate business, in the world of something called the new normal, as we see that, the demand for such remote access is on the significant increase. And another thing, the negative factors that we haven't been able to look at, in May and in June, we would like to discern them. And regarding the outlook, both for the negative side and the positive side, should there be any changes, we would like to disclose them. That's the background. Thank you.

Another question about the fiscal year that ended, one-time losses on the personal, JPY 30 billion reduction factor, given that and they may actually recover in this fiscal year. If the COVID-19 impact is within that, you might be to be able to see some recovery. But what about the comparison versus the previous term?

Compared against the previous term, the fourth quarter impairment factors are being looked at. So what actually happens in this fiscal year, it's something that we have to still see. On a continued basis, we would like to again record the increased profits.

Second question. UQ Mobile is now becoming a subsidiary. And in terms of capital, you have been truly integrated. So the integration is starting. There was a concept explanation about UQ Mobile Ponta. What about the specific synergy impact that you expect? Would you like to comment on those?

About the concept, we already gave you some explanation. So regarding the specifics from the personal business, Shoji-san.

Shoji speaking. Allow me to give you some explanation. If you look at the UQ Mobile, it's a group company. In terms of sales, there is cooperation. But in substance, it's now integrated with au. In terms of sales, the command and control or increasing efficiency at shops. au has au shops, UQ has UQ Spots. So enhancing efficiency or enjoying synergistic effects is one of the things we have been thinking about. And comprehensively, for customers, for low and to mid-volume, UQ. And the large volume, they can choose au. We can have a good lineup to allow customers to choose from. If you look at the competitors, SoftBank, they have SoftBank plus Y!mobile, the integrated sales have been working well for them. And we are now good -- in a good position to tackle them in mobile business. I think it results in the increased momentum. I hope I answered your question.

So UQ, and we will become a double brand and add new added value service, and we are expecting impact effect from them. So Morita-san, could you comment?

So regarding the integration with Ponta, well, the Ponta and Ponta integration. In the near future, we think we can make an announcement. The purpose of this integration is the point membership that exceeds 100 million, and we want to penetrate au into this member base. So the group common point and the payment foundation can be built from that, and that is the original purpose. And the other purpose, KDDI Technology and Lawson's 14,600 shops -- stores can be combined to come up with new-generation-type stores -- outlets. So that is the other purpose. And the synergy from this, largely speaking, enhancement of engagement. So if we have stronger engagement, au subscribers' churn rate will decline, and that is what we're expecting. Lawson is the open interface, and we will be expanding in that direction. So through this touchpoint, conversion to au can also be realized, and we will make the announcement soon. By the end of this fiscal year, we will be having more concrete numbers. And this next-generation-type convenience stores, this will be the new type of alliance, new type of service offering, Mitsubishi Corporation, Lawson and Loyalty Marketing, and we are in negotiation now. And by the end of this fiscal year, we hope to be able to announce something. That is where we are. Thank you.

At any rate, as Morita-san just said, the upper-layer Ponta, inclusive of this shift to open platform, will be discussed and announced soon. UQ succession will be October. So from there onward, we will be able to see some concrete impacts. That's all. Thank you.

Next question, please. Daiwa Securities, Ando-san.

Can you hear me?

Yes, we can hear you.

I have 2 questions. First, Slide 5, please. The gross -- growth domain profit. Regarding the drivers, those are pretty significant. And versus midterm plan, in the growth domain, the progress ratio has been very good. I think that's one of the things you mentioned. If it's a normal business in the growth business, usually, there's investment first and then the profitability comes later. I think that's the basic concept. That's what I thought. But regarding this growth domain, they're already profitable. What are the factors behind that profitability? If you could revisit that, please. And this term and the next term, is it -- are you likely to enjoy those? Would you like to comment on that?

Life design and business segment, we would like to address them in this manner. Morita?

Thank you for your questions about the life design domain. What are the growth factors? Allow me to first address those growth factors. In the previous fiscal year that ended, in content, energy and finance and e-commerce, the revenue expanded. But in terms of income or profits, perhaps for the lack of a better expression, we have been sowing and we have been growing the energy sector, and that's contributing significantly to the profits. Also, the highly profitable Smart Pass, centering on the Smart Pass Premium. In the content sector, in a continued manner, they are making contributions to the growth of profits. What about the factors? If you look at the services, they are, in principle, stock business. With the customers' expansion, revenues increase and the profitability also grows as a result. So what's going to happen in the future? Regarding the Smart Pass Premium, 9.65 million customers we have, but Smart Pass as a whole, there are 15 million. So there's more room for penetration. Regarding energy, au, 20 million users. There's much more room for further penetration as there are 20 million users. So we believe that we can still continue to grow.

So next, business segment, please.

Yes, this is more Mori speaking. Let me explain. In business segment, the growth this year is as follows. As shown in the slide, the core business and the growth business, there are 2 main areas for us. And in both areas, revenue, business size are growing steadily. For profit in the core business, mobile and fixed line business exists. For mobile business, ID is growing steadily, and ARPU and value-added portion is on top of that. So in multiplication, the monthly revenue and profit are increasing. In the growth business, the domestic group companies and overseas group companies exist and they are both growing their profits steadily. For the domestic group companies, the small- and medium-sized customers are growing and the other, call center business, for example, are also provided to various customers and it's growing the business. And lastly, IoT and DX. As you correctly mentioned, yes, we are doing upfront investment. However, this is not a start from 0. We have a sizable base already. So we are trying to generate profit and at the same time, invest in new areas. This fiscal year and next fiscal year and in the medium term, we plan to grow this business. Thank you very much.

Second question. Slide 21, please. Midterm plan is shown there. Regarding increasing EPS by 1.5x, I think that's the biggest objective. But given the difficult environment, perhaps that's one of the factors in the background. Going forward, in accelerated manner, I hope to see some of the rapid expansion or increase of EPS. Now operating income and buyback, those are sort of 2 wheels of a vehicle. But at the moment, to achieve these targets, how do you look at those 2 wheels of the vehicle or 2 factors?

As you can see in the presentation, EPS 1.5x, we would like to continue to aim at it. In this fiscal term because of COVID-19, yes, it's true that we are in a difficult situation. But as I said before, in this fiscal year, at least comparable to what we achieved in the last year, that's what we said. But for us to realize the sustainable growth, structural reform and using this as a good opportunity so that we can grow even more, further growing profitability. It's something we have been discussing extensively in the company. For shareholders, to have more returns to the customers -- the shareholders, the payout ratio, more than 40%. This is where we pledged. We would like to keep the promise. So we are planning to increase the dividend -- the payment of the dividend. As for the buyback, if you look at the global, as part of the vision for the society's sustainable growth, we would like to make a contribution. That's where we should really focus on. What can we do in that regard? We have already talked about in the statements. And as KDDI, what can we do? We would like to have a discussion and taking that into consideration. And on our part, if we can still afford this, if we can achieve this. As for -- regarding the share buyback, we would like to continue to consider them. That's the kind of order or that's the kind of process we have in our mind for this fiscal year.

Next question, UBS Securities, Mr. Takahashi.

This is Takashi (sic) [ Takahashi ] from UBS Securities.

I hear you.

I have 2 questions. First is about free cash flow. On Page 32, free cash flow increase and decrease factors. In others, it says, increase of a little over JPY 170 billion. So please give me the breakdown first. In this fiscal year, looking at your free cash flow plan, it is JPY 710 billion and around JPY 100 billion is IFRS factor -- 16. So it's practically JPY 600 billion increase. Are there other one-off factors? So could you elaborate, please?

Thank you. So Muramoto-san will explain.

Yes, this is Muramoto speaking. Let me respond to that question. First, the appendix, free cash flow, the waterfall chart. In others, it says JPY 176.2 billion (sic) [ JPY 173.2 billion ]. I cannot go into the breakdown details, but in financial, there are some influence factors. And the installment receivables of devices, the increase is becoming smaller. And the handset inventory decrease is also another factor. That pushes up this others segment. And upgrade program provision is also included here. So that is another factor. Now the free cash flow guidance for this year, as you know, is around the same level. So basically, EBITDA is in line with the previous year, and CapEx is also in line with the previous year. And M&A investment is expected to be the same level as last year. So in terms of increase/decrease from last year, there are one-off factors in the financial-related area. So that was included last year. So on a Y-o-Y, year-on-year basis, it's negative. The receivable -- installment receivables balance will decrease. So it will offset each other, and the total will be in line with the previous year. So that is the plan for this fiscal year. Currently, there are many influences, as [ Takaha-san ] mentioned just earlier. The flow of business, a revenue decrease in their subsidiaries and users' request for the postponement of the payment deadline. But overall, there's not a big impact on the group-wide cash flow. It's a bit unforeseeable, but that factor is not included yet.

So just for clarification. So previous year and this year, in terms of absolute amount, it is flat. That is your plan. But the breakdown is these one-off factors that was -- existed last year will be absent this year. So the free cash flow will increase? Is that your expectation?

There are pluses and minuses. So my image is roughly flat.

I understand. And my second question is about UQ. So UQ, going forward, will no longer be MVNO. It will be the second brand of MNO. Is that correct?

So I, Takahashi, would like to respond. So to be accurate, this company, UQ and UQ Mobile is separated from UQ and is transferred to KDDI. So KDDI has KDDI au brand and UQ Mobile as MNO. So both brands. UQ, on the other hand, will have the band 41 license and WiMAX 2+ service. As MNO, this will be provided to MVNO. WiMAX 2+ has a solid performance, so we will continue providing this service. Thank you.

[Operator Instructions] Next question, Mitsubishi Morgan Stanley Securities, Mr. Tanaka.

Mitsubishi UFJ Morgan Stanley Securities, Tanaka speaking. Can you hear me? I joined in the midway, so you might have already touched upon in your presentation global communications platform business situation. Toyota's auto production volume decreased and after that, the lifestyles have changed. And in the short term, what about the impact? And what about the midterm outlook? Are there any changes? If there are, please let me know.

Thank you. Mori will address your question.

Last year, actually, telecommunications for autos, we did offer that service, but expanding that service to overseas, starting from the last fiscal year, we started this business. Now this fiscal year, initially, increasing the local areas, increasing the countries or increase of the volumes is something we anticipated. But partly, as you said, more recently, the production plants closed or production being suspended and the sales of vehicles have slowed down. That has been observed in some places. More recently, in China, we see some recovery. And regarding other places, one after another, we believe that it will recover. In terms of fiscal years, compared with what we originally planned, we believe there's going to be some slowdown. But in the mid to long term, as a business, we believe that we can increase that as a business, as was mentioned already. After the COVID-19, lifestyles customs or the car -- the vehicle utilization are changing, and we would like to make sure that we discern such changes and then respond to them. Thank you.

I lack imagination, so that's why I'm asking this. The changes in how to utilize vehicles. So instead of owning a vehicle, you may actually be leasing them. But should that happen, what kind of changes do you see for your business? Sorry about such a question -- asking such a question. First of all, the sales volume of vehicles, what's going to happen in that area? That's one thing. Sharing, if people start sharing those vehicles.

We have been studying these things extensively, mostly in the Western countries, compared with public transport means, there are more needs for using vehicles. So there are those changes. I think there are some negative factors and positive factors. We would like to discern those. For instance, mass and sharing, if there's migration to service type. But the -- then the connectivity with telecommunications will be required even more than before. So we don't think that telecommunication services will no longer be necessary for autos.

One more additional question, if I may. So telecommuting is now progressing very rapidly. And in your company, telecommunication-related solutions or data center business, I think these are positive factors for you. So in your Business Services segment, the sales contribution in the year that just ended and some possible positive factors this year or some negative factors, if you could share them with me.

Okay. So again, some forward-looking outlook, Mori-san, please.

So the economic impact from COVID-19 is huge. Our customers' financial performance will determine the project postponement or investment reduction. We have to be prepared to deal with that to a certain extent. On the other hand, this work from home, this telecommuting and digitalization will progress. So mobile and fixed-line network and Internet connection will be more necessary than before and cloud will be used in bigger volume. There will be more usage of cloud. So we will capture such needs and grow our business accordingly. That's all. Thank you.

So could you quantify the impact, in yen terms, if possible?

As I said at the outset, the negative impact is sizable. So we are trying to offset that with positive impact and growth as much as possible. Yes, we will leverage and capture the opportunities and identify the positive factors and announce them as much as possible. Thank you.

Thank you so much for asking us many questions. Since it's time, with this, we would like to conclude KDDI 2020 March period meeting on financial results. [Statements in English on this transcript were spoken by an interpreter present on the live call.]