SoftBank Corp. (9434) Earnings Call Transcript & Summary

Ladies and gentlemen, we would like to now begin the briefing on earnings results for fiscal year 2019. I would like to introduce to you today's participants from SoftBank Corp., President and CEO, Ken Miyauchi; Representative Director and COO, Shimba.

My name is Shimba.

Representative Director and COO, Imai.

This is Imai. Thank you for being here.

Representative Director and CTO, Miyakawa.

I'm Miyakawa. Thank you for having me.

Board Director, Executive Vice President and CFO, Fujihara.

My name is Fujihara.

In order to prevent the spread of the coronavirus, we are all remotely participating. Today's briefing session is streamed live on the Internet. Without further ado, I would like to ask Mr. Miyauchi to talk about the results as well as the business performance.

I am Miyauchi from SoftBank Corp. We are hosting the briefing session today. Currently, due to the spread of COVID-19, there are many people who are impacted. I would like to express my heartfelt condolences to everyone who are affected. Also, I would like to express my appreciation to the health care providers who are working day and night to stop the spread of the disease. I would like to thank you for coming out of your busy schedules on the Web, on the Zoom, in a format of video conference to attend the briefing. I would like to thank you for coming today. Now I would like to start my presentation. So there is some technical trouble with the slide. Please wait for a moment. Under this environment, people have to stay at home. And due to the policies of the government, in order to prevent the infection, everyone is trying to reduce the physical contact with other people by 80%. People are working from home, children are staying home because schools are closed, and events are not being held. All of Japan is working to stay at home. Under the current situation, I believe that our responsibility as telecommunications operator is increasing. We are trying to connect the people who cannot physically meet with each other. We are a lifeline. We have thought through what we can do under the situation. We have been thinking since February, and you may not know this so much, but we have provided iPhones to the cruise ship in Yokohama. We provided 2,000 handsets. The schools are closed, so there needs to be a tool for remote education. So we have decided to provide for free Smart Coach. In addition, because data is needed, we have provided for free 50 gigabytes for the purpose of education of students. And also, we have been distributing the Zoom system, and we have supported people to conduct telework. Also, we have extended the deadline for the payment of the telecommunications fee until the end of September. Now we are seeing acceleration of introduction of telework everywhere. The fixed lines and mobile lines are being used more and more, and the data traffic is increasing significantly. Our mission is to continue to support the societal foundation. As SoftBank, there are some things that we would like to say. We have been trying to identify our materiality or priority issues in realizing SDGs. I think you know about SDGs very well. SDGs are 17 goals of sustainable development. We have looked one by one to think about what we can do for our society. SoftBank has been trying to make people happy through information revolution. This has been our principle since the foundation of the company. We have been trying to contribute to the society consistently through information revolution in the era of PCs and Internet, in the era of mobile phones and smartphones. Within a decade, there has been a lot of paradigm shift. A lot of new things have come in the past decade. And now we are seeing the start of the biggest paradigm shift ever. At the end of March, we have started the 5G network provision. And 5G has a huge power. And currently, because people are accelerating the adoption of the remote work, there has been -- there has been a lot of changes which are creating huge paradigm shift. There will be shift in the work style, and also there would be responses made to the climate change. I believe that there are many things that we can do amidst this change. And we have identified our priority issues or materiality, and we would like to contribute to the achievement of the SDGs. The first point is building society and industry through digital transformation. The value which will be created includes expanding of the foundation of the industry through cutting-edge technology or to reactivate the local communities or to create new industry through digital transformation. The 3 goals in SDGs and what we are trying to accomplish are very much in line with each other. The next one is connecting people with information to create new excitement. The value which will be created includes, through smart device, we will create attractive value. Or through the usage of ICTs, we would like to provide new lifestyle or foundations for new lifestyle. We would be able to provide that. That will be our goal for the mid- to long term. The third one is creating new businesses through open innovation. I have looked into SDGs, and I have gotten feedback from my subordinates. And we thought about the creation of new value, and the incubation of new businesses together with overseas companies will be possible. We would be able to hire new talent through open innovation. I think that's our materiality as well. Another point is contributing to the global environment with the power of technology. Technologies, especially 5G and IoT, it can be used to respond to the climate change. And also circular economy, we can contribute to that as well. Through the more widespread use of renewable energy, we would be able to create richer society. The fifth materiality is our core business, building high-quality social network. We would like to contribute to the creation of telecommunication which is failure-free at this time of disasters. And we would like to provide safety and comfort to the society. Last but not least, the sixth materiality is building a resilient management foundation, having a firm management foundation to promote corporate governance. Also to develop together with our stakeholders and also having diversity and inclusion for the happiness of people, we would like to contribute in that area as well. In summary, these are the 6 materiality, the priority issues. And the first 3 are the things which we have been working on for a long time. Our growth strategy, a structural reform, that has been worked on in the first 3. Together with SDGs, we would like to -- going forward, to work on the change in the societal structure, so we want to create a society where everything will be connected, including good information and people. And now I would like to move on to talk about the earnings results of fiscal year 2019. First is consolidated results. Revenue was up 30%. In all of the segments, we have been able to see, including Yahoo, Distribution, Enterprise and Consumer, in all of the segments, we were able to grow in revenue. Operating income, we were able to increase by 27%. So I would like to click myself, so can you give me the authority to change the slides? So operating income is 27% up. Even after the debt holdings adjustment, it's 11% growth. This is segment-by-segment in operating income. In all of the segments, we have been able to see increase in income. As I have been informing you from before, we have Beyond Carrier strategy, which we have set out. We have core telecom business. And we have the Yahoo business. And we have the new business fields. We are launching them one after another from last year. We have been able to realize it. So I will go into details later on after these slides. Let me talk about the telecom business. Looking at the Consumer business revenue, this is the telecom service revenue, so that's mobile and broadband. This is up 4% year-on-year. As for the handset sales, because of the consumption tax hike and new -- amended Telecommunications Business Act, for those reasons, we see slight revenue decline in handset sales. But telecom service revenue is steady. Our initiatives, which we have said in the previous earnings announcement as well, but we are promoting multi-brand strategy. We have 3 brands which we're positioning well in the market. And in addition to that, we have Yahoo and PayPay. These are the core companies of the group strategy. We collaborate with them to promote this multi-brand strategy. So let me speak about the SoftBank brand. As you know, in March -- middle of March, we launched Merihari Plan. This is large capacity plan. Basically, it's unlimited use of subjective videos and social media. You have the capacity of 50 gigs, so it's unlimited and -- de facto unlimited. Very well received. And as you can see from the word Merihari, so as you can see on the right-hand side, let's say, if you don't use it very much that month, then automatically, you will get a discount of JPY 1,500 on that month. So depending on your lifestyle, you may have a month which you have large use, maybe not on certain months, so you will have a flexibility, a very well-balanced plan in that sense. Now we have the Smartphone Debut Plan. One after another, because of the coronavirus and people working from home, people are spending more time at home, and so many people are wanting to switch to smartphones. In that sense, Smartphone Debut Plan is also growing nicely. Now if you look at this large-capacity Merihari Plan, we are -- every time we launch a new plan like this, we do a consumer survey. And you can see that satisfaction level is very high. So if they want to upgrade or if they decide to buy from SoftBank, then they shift to Merihari Plan. So we're seeing a very nice start. As far as Smartphone Debut Plan, again, the number of subscribers is increasing more than 2x compared with the prior plan. And let's look at Y!mobile. As you can see, we have enhanced our price plans. SoftBank brand -- before 2 years ago, we have started an unbundling plan. But for Y!mobile, we started from last year, and we're reinforcing the price plans. We have 3, [ S, M, R ], simple plans, 3 plans, which we have laid out, and we're also building dual-brand shops, SoftBank brand and Y!mobile brands, the dual-brand shops, which are expanding nationwide. We're seeing a rapid increase of about 100 -- 1,800 shops, 1,800 shops nationwide. And in terms of the satisfaction level of the price plans of Y!mobile, you can see it's 94% satisfaction. And just within these last few years, the cumulative subscribers have increased by 5 million. With regards to LINE MOBILE, you can see the customer satisfaction of the plans at 93%. This is very steady. In 2018, so 2 years ago, LINE MOBILE joined the SoftBank family. And since then, the cumulative subscribers have been growing rapidly like this, and it's gaining a very high level of customer satisfaction. Small capacity, but for customers who want to use it for social media, it's meeting their needs. We have collaboration with Yahoo and PayPay. As I have said earlier, in new acquisitions, we can award PayPay at that point of subscription with the bonus light or we have -- offering user benefits. So for example, if you use PayPay to shop, then you get 20% back. So we are collaborating on different promotions as a group. And as a result, we have been able to increase the number of users. And as a result, last year, we have had net additions of nearly 2.05 million. This is up 9%. If you look at FY 2016, 2017, even compared to those years, you can see that we have seen a significant growth in 2019. Let's look at the churn rate. Again, this is record low. It's 0.7%. In that sense, the traffic at the peak time have doubled in 2 years. We are consistently increasing our base stations. We have numerous base stations, and we're also utilizing massive MIMO technology as well. And these are building an indispensable network that is resilient to increased traffic. Now 5G, as I've said at the beginning, this is the beginning of the new era. More than 4G in the past, we can see a great involvement. In 5G, we can have these strengths. One is the use of existing base stations. We have around 230,000 location sites nationwide. This is a great contribution to 5G. Secondly, and we have the massive MIMO know-hows. We had these know-hows from 4G era. The high throughput waves will be used. If you need to transfer a large amount of data or you're watching a movie, this will be very, very effective. And also in April, we announced this, we're building a joint venture with KDDI. It's a 5G joint venture. And with KDDI, we can accelerate 5G rollout in rural areas. And by the end of FY 2021, this is how the 5G deployment will work. So we started in March in 2020. By the end of 2020 fiscal year, it will be -- hopefully, 47 prefectures will be covered. That will be maybe more than 10,000 base stations. And again, during FY 2021, we have the stand-alone deployment, and then we can have population coverage 90% plus by FY 2021. It's 4G, 5G today. But by then, we will be able to deploy stand-alone -- 5G stand-alone by 2021. And we will be able to deal with ultra-low latency and mass machine connections. And this new society with 5G will allow us with these things. I don't need to tell you all about it, anyhow. But you can see ultra-high speed, large capacity, mass machine connections and ultra-low latency. So self-driving or if it's remote surgery, 5G will be able to deal with all these different points, areas, and this will lead to social structural reform. Now let me talk about the Enterprise business. The revenue of Enterprise has been growing very nicely at up 3% year-on-year. In particular, what has grown significantly is the business solution and others. This has increased by 17%. In one word, cloud computing, IoT, security and digital marketing, these are the drivers, and these are increasing, expanding. With regards to the business solution initiatives, like I said earlier, we have cloud, we have multi-cloud strategy, which we are promoting. The revenue is up 36% year-on-year. So we start with G Suite, Alibaba Cloud, Microsoft Azure. These are all the things that we are offering. And with regards to IoT, we're seeing a revenue of up 200% plus year-on-year. And we have numerous examples, but there's 2 just to give you a few. So for example, in the train, you can have a fluorescent light integrated security camera service. We're getting a lot of inquiries about this. Or we can remotely monitor the LP gas meters. So whether it's cloud or IoT or even a videoconferencing like this today, if you continue to do things like this, security will become increasingly important. And again, security business is also growing by 167%. And then digital marketing will become increasingly important. Yahoo, INCUDATA, these are our group companies. So the next generation will be digital. So marketing and sales will shift to digital. So in that sense, we have many, many opportunities for Enterprise business. We're just starting in this business. And if you look at the current situation, actually, with this pandemic coronavirus, COVID-19, people are working from home -- many people are working from home now. And as a result, in order for us to contribute to the society, the VPN access on the Internet or Zoom or UniTalk, like between February and March and April, you can see a surge by 6x, 10x, 2x. In any case, digital transformation, we solve issues for enterprises and society through digital transformation. Through shift to digital, there's many things we can solve. And next is Yahoo. Let me briefly talk about Yahoo. Yahoo already announced its earnings results, so I'm sure you're familiar with their results. So revenue has increased by 10%. And in particular, last year, Yahoo has announced new growth strategy, so PayPay Mall, PayPay Flea Market, ZOZO acquisition, collaboration with Yamato Holdings, cross-shopping concept. So they have made dynamic management decisions one after another. And as a result, their e-commerce transaction value has increased by 14%, very nice. And furthermore, what I want to really emphasize is that Yahoo Japan is now our subsidiary. And SoftBank KK is a network company. We have the network telecom technology. Meanwhile, we have very strong sales and marketing capabilities. I'm sure you know that. So from this autumn, we started collaboration with SoftBank, and we're seeing an effect of around JPY 4.4 billion already in terms of the uplift in ad placements. So JPY 4.4 billion is just a practice. We're just starting for the first time together. So for next 1, 2, 3 years, we will continue to collaborate in sales, and I hope we can give you more news on this. In terms of the operating income, it was JPY 152.3 billion. We were able to make a turnaround. We can have high expectations for Yahoo, Yahoo Japan, Z Holdings and SoftBank. And towards the end of this year, LINE will be entering our group. We are creating a future that others cannot repeat. We want to become a group which provides something that others cannot provide. Next, I would like to move on to talk about Distribution and others. This is the annual performance briefing. I would like to talk about this business as well. Distribution business is growing steadily. It has grown in revenue as well as operating income. SB Payment Service is also growing handsomely. It has grown 60% in operating income. And the amount of transaction value of the company is JPY 3.5 trillion. We can have high expectations for this subsidiary. As a result of that, from what was JPY 818.2 billion in operating income last fiscal year, we were able to increase by 100 -- JPY 19.8 billion in Consumer business; and in Enterprise and Distribution, JPY 9.2 billion increase, especially through the increase of the business solution services. Yahoo Japan grew by JPY 16.4 billion, growing in the Commerce business. And there are some temporary impacts of PayPay, but the others has grown JPY 48.1 billion. And all of the segments has contributed to the increase in the operating income by 11%. I would like to talk about our equity method companies. We are creating various new businesses, and I will be talking about this later. And currently, we are still in the red ink. However, those businesses, if they turn profitable, then it would be contributing significantly to our business. Next, I would like to talk about the new business fields of SoftBank providing a new value to society. As you can see on the slide, for PayPay, we will be concentrating our investments. Thankfully, now a lot of the people think about PayPay when you hear the word smartphone settlement services. DiDi, WeWork, MONET, they're our new other businesses that we have in our portfolio. And digital marketing, AI map services, AI image authentication, we are looking into various growth markets, and we are trying to enter in those fields. And now I would like to talk about smartphone payment service, PayPay. As you know, registered user number has exceeded 28 million as of the end of April 2020. It has significantly exceeded our expectation. Number of payment has grown by 17x. And now the accumulative number of payment is 1 billion; and in the second quarter -- in the fourth quarter, 375 million payments by PayPay. There are many customers who use the PayPay services. I think you can see from these numbers. So this is a chicken or the egg, and there are 28 million customers, and now we have stores which would enable the use of PayPay in the number of 2 million. So we are going towards the direction where people will be able to pay with PayPay anywhere. In fiscal year 2020, we will make full-scale entry into financial services with PayPay. Business loan, personal loan, Postpay, investment, insurance, we have been saying that we will enter these fields, but we will enter full scale this fiscal year. As for Postpay and investment, we have just started the service. This will be a big pillar of PayPay which would contribute to the profitability of PayPay and growth of PayPay. I have shown you this slide many times. Utility bills, tax, off-line, online, O2O, everything will be covered by PayPay, making it a super app. On a personal note, I tried to pay the tax in Ito City, which is a rural area, but I was able to pay those taxes with PayPay. Now PayPay is enabling the easy payment of utility bills as well as taxes. Now I would like to talk about DiDi. The area of service has increased to 25 prefectures, and there are 563 taxi partners. In 1 year, number of taxi partners have grown by 11x. Now we are on the edge of growing even further. Number of the taxi hailing has grown by 8x. So with the COVID-19 outbreak, the growth is flattening, but it's still growing steadily. This data is very important. People are staying at home, and the taxi industry is facing a lot of difficulties. Hotel industry is facing difficulty. And actually, DiDi is helping to mitigate the reduction. So overall, in the taxi industry, there has been reduction by 30%, but those using DiDi have not gone into negative as much, so it has mitigated the negatives. With taking various initiatives, we are taking prevention measures for the spread of the virus, and we are supporting people's transportation. We are conducting various initiatives. Next is WeWork. With regards to WeWork, membership in Japan has increased by 1.8x in 1 year. We have 22,000-plus members. Last quarter, there were a lot of negative news about WeWork in United States, but actually, WeWork Japan is doing really well. In particular, we have concentrated memberships in Tokyo area with high occupancy rates. I believe that the area's occupancy rate is above 80%. So we believe that new offices will be open one after another, mostly in Tokyo -- Central Tokyo area. So we believe that we can continue to expand WeWork Japan. In particular, work style reform is the needs of the new era. Probably more so than the West, I believe that the reform will take place very rapidly and drastically in Japan. So in order to support the diversifying needs of the office, in fact, I was just talking to people from WeWork Japan earlier, but the churn rate is much lower than their expectations. That's the situation in April. And on top of that -- I should say, on the other hand, because the companies want to shrink offices or actually spread out offices, many -- we were able to sell many seats in April. So we would like to aim for monthly breakeven during FY 2020. That's our plan. Next is OYO Hotels. We received many questions concerning OYO in the last earnings results. But as you can see, we are trying to revamp, rebuild the growth strategy. We have received many opinions, many inputs from people. We want to be sure that we're able to steadily grow this business. So December -- up until December, it was just simple expansion. But in Q4, we will be maintaining the current number of hotel rooms, but at the same time, we would to make efforts to provide community-based services. So with regards to the end of March, occupancy rates is -- remained stable at 51%, while the Japan hotel average is 32%. So you can see that people are actually utilizing OYO Hotels. Management-wise, I think 60% above is better, but even -- despite the situation, we're still able to finish above 50%. And that's the situation for April as well. So OYO Hotel Japan, we are also implementing COVID-19 support programs. We have hotel ownership support programs, and we have medical personnel support program as well. With regards to the medical person support, we are providing free accommodations for the health care professionals. So while the environment is very challenging today, we know that we can continue to grow OYO Hotel business. Next is Cybereason. As we see advancement in digital transformation, we will continue to face the challenges of security -- cybersecurity. And in order to respond to that, we have Cybereason as a part of our group company, which is receiving #1 accolades and appreciations around the world. And you can see the many companies in Japan have already implemented Cybereason. Endpoint detection and security solutions are being implemented. And Cybereason is actually evolving. They're not just doing EDR, but they're doing endpoint protection as well. So in that sense, the number of active endpoints have exceeded 1 million users, active IDs, in a very short time. In March, we see a surge. So we have other SoftBank encryption and authentication technologies which are doing really well in itself, but Cybereason is really displaying its capabilities today. So these 3 core businesses, core telecom, Yahoo, and we have the new business fields, through these 3 pillars, we have been able to achieve a record high of JPY 473.1 billion in net income. And of course, this has income tax related to LINE business integration of JPY 19.5 billion, which were -- it's an extraordinary factor. But even though, we're still recording the highest in the history. So as you can see in the summary, we have been able to realize increase in revenue and income. You can see that even EBITDA has made improvement. And operating income and net income, we have also increased year-on-year. And also with regards to CapEx, we are going full scale with 5G investment. By the end of FY 2021, we want to have 90% coverage nationwide. In order to achieve that, we're maintaining this JPY 380 billion level. Now adjusted free cash flows, it's JPY 524.2 billion, so we're maintaining this level of JPY 500 billion. And dividend per share, it remains as planned. It's a committed amount of increase of JPY 10, of annual payout of JPY 85 per share. So last but not the least, I would like to give you our forecast for FY 2020. This is excluding the impact from LINE business integration. Even with the impact of coronavirus, we continue to increase both profits and dividends. With our management policy, like I said earlier, in telecom, we will increase the smartphone subscriber. We will be actively deploying 5G. We will promote digital transformation for enterprises. With regards to Yahoo, we can expand e-commerce and financial services businesses, and we will promote business integration between Z Holdings and LINE. In new businesses, we will monetize the expanding businesses like PayPay or DiDi or WeWork. They will be monetized. Furthermore, we will create new businesses on top of the new technologies. We continue to create new businesses. At the same time, we will carry out structural reform. We will do a promotion of cost efficiency across entire company. This has been done relentlessly. So that's our management policy for FY 2020. However, there will be business impact of COVID-19 which is serious. You can see a table, negative, immaterial impact, and you can have additional sort of demands. This is a brief summarized table of that. So for telecom, for shop traffic, whether it's call center or the shops, for us, the most important is the life of the people who are involved in those businesses. So we have decided to open for shorter hours between 11:00 to 4:00 at the shops. And also, at the call centers, we have basically reduced the number of operators by half so that they will have open seating between the operators. So that's negative in terms of shop traffic. But with regards to the number of subscribers, we will continue to remain stable. And in fact, we had some increase. For example, data traffic during the day time, especially in the residential areas, have increased. Fixed lines, whether it be Hikari, they have been increasing. And also mobile traffic have also been increasing. In particular, for enterprises, there's a rapid increasing demand for remote work. So if you look at positive and negatives, you can say that impact on the telecom is immaterial in general. But for Yahoo, there will be negatives for ad placements, travel, restaurant, hotel businesses. Meanwhile, e-commerce, if you look at transaction value for April, this has increased significantly and used -- time used on Yahoo! service has also increased as well. Subscription services is also stable. So ad placement is somewhat uncertain in the future of media business is uncertain for the future, but e-commerce is positive. So that's our view on the business impact from coronavirus. So in that sense, revenue, we're giving a guidance of JPY 4.9 trillion, which is up 1% year-on-year. Operating income. Our guidance for FY 2020 is JPY 920 billion, which is up 1% year-on-year. Since both is small, but we have to take into account coronavirus impact. So we want to be sure that we're increasing revenue and profit. Net income, JPY 485 billion. That's an increase of 3% year-on-year. So this is what we want to commit to our stakeholders. We will continue to increase in revenue and profit, and we will continue to increase dividend. We would like to pay out an annual dividend of JPY 86 per share. So in summary, for FY 2019, this was the result. For FY 2020, we will continue to increase both profit and dividends no matter what. Even though we have some uncertainties over COVID-19 and the holding business, we believe that impact on the telecom business is immaterial, and we will continue to proceed with the business integration of the Z Holdings and LINE. So thank you so much for listening to us.

We would like to move on to the question-and-answer session. We would like to make preparations. Please hold on for a moment.

Thank you for waiting. We would like to move on to the Q&A session. [Operator Instructions] [ Ishikawa-san from Freelance ]. [Operator Instructions]

My question is as follows. There was a change in the [ Telecommunication Business Act ] in October. And there was not much impact from the amendment, it seems that your performance was very steady. Even though the handset sales had gone down, but there was not much impact was there. And in terms of the extension of the extension of the period to end the PHS, I would like to know about that and what you would do with the rate blend after this PHS service is -- the spectrum for PHS, what you would do after that.

As for the device or handset sales, how much it has dropped is very difficult to say because there was a consumption tax hike also. Prior to that, there were a lot of sales promotion fee that has been provided, a lot of subsidies provided. And because of that, last year, there was good sales of handset. And in October, there was an amendment in the act as well as consumption tax hike. So there was a last-minute selling of the handset prior to those 2 things occurring. From that perspective, I don't think that there was too significant of a drop in the sales of handsets. The discount was limited to JPY 20,000 after the amendment of the law and the balance of the handset. The high-end, middle-end, the lower-end handsets, we are able to sell those types in a balanced manner. So I don't believe that there was much impact. To your question about the extension of the PHS service period, we wanted to complete the service as we had planned. But in the hospitals nationwide, they have made a request. That they still want to continue the use. So we decided to extend the PHS usage period until the end of January. In terms of the spectrum to PHS, what we will do afterwards, Mr. Miyakawa, can you comment on that?

This is Miyakawa. 1.94 Hertz, which is used by PHS. So the specification that we are using now is to use it as 4G, this dedicated band. After the discontinuation of PHS, whether that would be utilized in the 4G area or whether it would be using for something else, we need to discuss that. In elevators and in modules of the cars, they still use this spectrum. So it would still take time to collect this spectrum, but we want to start a discussion of how we would be able to use this spectrum afterwards.

Next is [ Mr. Noguchi from Nikkei ].

This is [ Nikkei, Noguchi ]. I have 2 questions. First question, FY '19, you have subsidiaries -- making total subsidy and LINE integration. You have a lot of growth and also investment in non-telecom business. And a lot of your carriers, competitors are actually putting a lot of investment into telecom. And I think you need to be sure that you're not behind an investment. But as you had said, also you are also proactive in returning to the shareholders, and I'm afraid that you finance position is deteriorating. Now you said adjusted free cash flow is exceeding the dividend amount. So if you look at the operating cash flow, investment cash flows, it's actually exceeding the total dividend amount. So your shareholder equity is deteriorating. And also, I think balancing growth, investment and also [ this transition ] is difficult to achieve. So for example, you need to maybe keep down the dividend until you're able to monetize DiDi or other new businesses. What is your policy on this?

With regards to the dividend policy, we don't have any intention of changing yet. Our business -- I'm getting feedback here, but anyway, I think the growth strategy and in terms of shareholder, I think your opinion was it's difficult to strike the balance of the both, but actually -- I'm getting a feedback. What -- should you be muting? Are we okay? So apologies. So we're determined to balance the both because free cash flow, we're maintaining the level of JPY 500 billion in free cash flows. And even if we're doing a dividend payout ratio of 85% from there, I think we will have more than JPY 100 billion in cash left. So in that sense, we can do both, growth investment and return to shareholders. Now we have made a lot of upfront investments. But in reality, the investments we will be making going forward will not going to be that big, whether it's DiDi or OYO or WeWork or anything business -- any business, Z Holding might be doing? We had a very large investment, which require a lot of cash, but it's not going to be that big anymore. In fact, it will be more for fostering the businesses. So in that sense, we can continue to pay out dividends in a stable manner. Mr. Fujihara, would you like to amend me or supplement?

Thank you. This is Fujihara, CFO. So what we take into about free cash flows, we're dividing net interest-bearing debt. And we're -- for us, the net debt ratio is really important. It is 2.5x today. And before consolidation of Yahoo, it's 2.4x. I think you can say it's stable. With AA ratings, this is slightly lower than the average. So we would like -- average ratings. So we would like to continue at this level. And as Mr. Miyauchi explained, free cash flow and dividend relationship is always interrelated. After you pay out the dividend, so you're deducting dividend after free cash flow. Basically, we have the capability of generating JPY 100 billion consistently. And I think that's reason why we're able to pay out a large dividend. So with the growth in profit, we can also increase in free cash flow. So I hope that you'll continue to keep an eye on us in that sense.

My next question. You have been proactively conducting growth investment, but you also have had record high income and -- but I think that you're still -- expectation, you have not been able to reach the expectation of the market. So what do you think is the reason why the market does not expect so much from you in terms of the growth from the stock market?

So it has been 1.5 years since the IPO, and there was a drop from the offering price. And we have gone beyond JPY 1,500, but then it has gone below JPY 1,500 level again. So it has fluctuated. But if you compare with other companies, amid the COVID-19 pandemic, if you look at the stock prices of other companies, our share price, it's JPY 1,470, about 2% lower than the IPO price. So it has stayed at that level. Last fiscal year, we had made Yahoo! Japan into a subsidiary, and we have conducted various upfront investments. So I believe that going forward, we will be able to exert our full power to the full-scale, and I think that the fruit from the Beyond Carrier strategy will be coming out. And when that happens, I believe that the share price can go up. I am not committing to that price. But what I'm expecting is that at the point where we would be able to see the fruits of our strategy, I think it will be reflected in our -- the evaluation of the market. We are not satisfied with the share price level now, but I'm sure that the market will be seeing us and evaluate us fairly going forward.

[ Mr. Zita from NHK ]. [Operator Instructions] I think he's still muted.

This is [ Zita from NHK ]. I have 2 questions. First of all, with related to 5G, after starting the service, what is your current subscription level? What is the growth of subscribers?

So 5G just started. In that sense, there's only a pinpoint network. There's only certain areas you can use. But I think we're getting a nice feel for customers, users' interest, and we have a content called 5G Lab. So I think it's a so-so start. We have executive officers who are responsible for the business. So I would like to invite some of them. So I will ask Mr. Shimba.

This is Shimba responsible for consumer business. With regards to the subscribers for 5G, it's not -- for these handsets, number of handsets, so we're not making that public. But as I have been saying, we just launched. And it is on track in line with our expectations. But what's important is from now. So we have until March 2021 and then FY '21, which we want to really accelerate. And so I think it is in line with our projections against our target. With regards to 5G Lab, again, this is not made public yet, but many people have applied. And even -- it's just started so we're taking cautionary surveys to check the customer satisfaction on a day-to-day basis. Out of scale of 5, we're getting like 3, 2 -- 4.2 to 3. So it's good. But unfortunately, because the coronavirus, we're not able to shoot the contents that we really wanted to. So we're just looking for the balance. But I think this is an opportunity for us. This is a time for us to really grow from here at this point onward. So that is all from me. Does that answer your question?

Then I have another question.

Yes, please.

In fact, about COVID-19. Mr. Miyauchi, you said that shop traffic will -- is expected to decrease. So today, what is the handset sales? Is it decreasing? What is the impact today, and also the impact on supply chain? And would it have any impact on building infrastructure for 5G?

I will be answering that question. We deliberately reduced the business hours of the shops so that we can have the number of people working. Because of that, to be honest, we're decreasing in net adds or acquisitions because we're seeing decrease in traffic. We're using newspaper ads. To say that if there's an emergency, for example, breakdown in handsets or you really need to change the smartphones, switch the smartphones, we're basically saying that -- through even the newspaper ads, don't come to the shop unless it's emergency, urgent. So this is to protect the lives of both the users and the shop staff. And we're putting a lot of emphasis on that. So in that sense, we're seeing a decrease in acquisition. But we're seeing less churn as well. So in that sense, this April, May, during this -- when the emergency was declared, I think it will be a big significant decrease. But let me ask Mr. Shimba to explain this as well.

This is Shimba from consumer business. It's exactly as Mr. Miyauchi said. So we want to protect the lives of the shop staff and the call center operators. Safety is #1. So the number of customers visiting the shop, so traffic will decrease significantly, and it will be very difficult to achieve -- it is actually decreasing, new acquisitions as well, but less churn as well. So for management, both are important. But what's important really is the ARPA with Kona. So smartphones and tablets are really lifeline for the customers. We really began to understand that it's lifeline for the customers. So when the environment is back to normal, again, we continue to offer this service to the customers. So it's really post-corona that's important.

And also, the question about base station development of 5G. Mr. Miyakawa, what is your answer for that?

Thanks for your support. There is a slight impact, to be honest with you. Overall, maybe 10%, 20%. When the owners are building a base station, when you ask them if it's okay to go up on top of the building, maybe 10%, 20% of the owners are saying no. So there's some missed out opportunities. But our plan -- and we're always about 50% above our plan. So actually, our plan today is a little higher. We're actually trending a little higher than our plan. And we're planning to open 147 base stations this year. That was what we had filed. But as you have just saw on the earnings result, we should be able to start-up about 10,000 base stations. So with regards to the construction of 5G infrastructure, I think you can say it's very steady. Thank you. That is all. So yes, so that's the situation. Thank you so much.

From the Nomura Securities, [ Mr. Matsushima ]. [Operator Instructions]

This is Masuno.

Yes, we can hear you.

Maybe there is something wrong with the sound? JPY 920 billion in operating income, that's your target. If there is not much impact to telecommunications, I was wondering why it was. So how much concern do you have? How much buffer do you see?

So it's very difficult to say how much buffer in exact terms. Internally, we have internal target, and the target internally is higher. However, this is not something that we disclose to the public because if we disclose it, it will be a commitment. We are saying JPY 920 billion. And we are committing to this figure. That's what we mean.

I would like to make confirmation for telecommunications business. There would be positives and negatives. But overall, in -- on a net basis, there is not much impact. It would be a neutral impact. Is my understanding correct?

As for telecommunications business. I believe it's -- the situation is more bullish. The telecommunications have become lifeline of our users. There is also change in the work style, like introduction of remote work. So telecommunication is something that people cannot live without. Maybe we should have had more bullish figure than JPY 920 billion, but there are some uncertainties, which is COVID-19, the coronavirus, which is something that we cannot predict. So if the physical contact is reduced by 70% to 80% until the end of May, and if there is a second wave of infections, then there is a possibility that this situation may continue for 6 months. So I think that we have to think of contingency plans. If you look at the trend around the world, in South Korea, they thought that the situation have calmed down. But now it's resurging. And we have to think about when the vaccines will be launched, and when a drug for COVID-19 will be launched in the market. Unless we know those things for sure, we would not be able to have big figures, which we must commit.

So you're saying 6 months as in until September?

Well, I am not an expert in COVID-19, so I don't know about how long this -- the impact of the virus would last. But as a businessperson, if this situation continues for 6 months, then it may be towards the end of September, and it may end before then. We don't know. I am not trying to predict when the virus will go away. But from the management perspective, we try to have contingency plan in place. If the virus impact had lasted for about 6 months, then we believe that there would be a huge negative impact to the Yahoo! sites for travel. No one can predict what will happen. So for the things that we cannot predict, we should be more pessimistic.

Thank you. [ Mr. Ishino, Freelance. ] [Operator Instructions]

My name is [ Ishino ]. I'm a freelance writer. I have 2 questions. About coronavirus, with regards to mobile traffic, what is the direct impact, increasing on traffic or decrease? What is the impact? So on the price plans, what's the preference of people going with the price plan? What's the conclusion charges as well? Second question is the 5G. You've been talking about this since the launch, but you expect -- saying that there's 23,000 sites. How much of that will be used for 5G? So that is all for me.

Thank you. So how much increase in mobile traffic? Let -- I will let Mr. Miyakawa answer that question.

Thank you. I'm CTO, Miyakawa, speaking. So we mentioned those in the earnings results as well, but the fixed line, the traffic has doubled. Mobile is proportionately increasing. I can't really say the exact number, but in several dozens of percentage. In particular, uplink is increasing a lot more than we had expected, I would say, more than 50% increase. So even the peak traffic time is shifting towards daytime. So video chat, online classrooms are increasing one after another. I think that's the environment. However, since the start of the phenomenon of corona and when we asked all the carriers around the world, like China, Europe, we're getting a lot of data from them, and we have made countermeasures against traffic. As a result, we're able to deal with this increased volume and traffic. But we can't be complacent. We still need to be cautious.

And also -- but the question about 5G, how much of the 23,000 will be 5G? Can you also answer that?

Yes, I will do so. Among the 23,000, how much will be 5G? We're thinking we'll be using it to a significant amount because 5G will probably exceed 23,000, far exceed that number. That's our plan. So I think that will be the number.

And your question about mobile traffic rates, let me answer that. We are consistently -- in SoftBank brand, we're doing large capacity strategy. And people questioned in the past about do we really need that much large capacity. But if you look at today, and as Mr. Miyakawa said, student -- since all the -- most all the universities until the summertime are going online classrooms, I'd say almost all universities are closed and they're using Zoom classes, then you need at least 30 gig, maybe even more. So minimum 30 gig. So it's better to be joining the Merihari Plan. And of course, if you're at home and if you have SoftBank or air or if you're using WiFi, then that's also the case. But what I want to say is that smartphones, smart pads, PC, if you're using those devices and if you need to use video chat -- it's not just watching Netflix. You're actually using this for your work or for as education. That sort of use will increase. So in the future, in the world of 5G, I think you will be -- see more and more large capacity use. But the pricing policy strategy that we have implemented, consistently is, I think, converting to a really nice direction along with this mobile traffic. That is all from me.

Thank you very much. Because of the constraint in time, we would like to take a question from 2 last people, last 2 people. Mr. Inoue from [ Asahi Shimbun ] newspaper. [Operator Instructions]

My name is [ Inoue ] from Asahi Shimbun Newspaper. Can you hear me?

Yes, I can.

You talked about the rollout of 5G base station rollout. I have supplementary question. It's very difficult to predict what will happen to COVID-19 situation. But if the COVID-19 situation prolongs, it's -- if you cannot procure necessary equipment, I think that there would be a negative impact. What's your take on this?

Mr. Miyakawa, please.

At this moment, there is no problem in the equipment procurement. We are looking at the supply chain, but I think that this year, we are in the clear. Does that answer your question?

So at this point, you don't have any concerns about the procurement at this point and also in the future?

We cannot imagine how long the impact will continue. But at this point, there is -- we don't see any problem.

So Nokia and Ericsson, where are they manufacturing their equipment?

The final assembly is being done in China, mostly, antennas, cables and power sources. There are many parts involved in the equipment, but we don't see any significant out of stocks. At this point, we have been able to get the delivery on time. So I think that we will be fine.

Thank you. This is [ Suruga ] from Nikkei Newspaper. [Operator Instructions]

Suruga from Nikkei. So you're starting a new year with corona crisis. Now as you see decrease to the visitors to the shop, what is your thinking on the way these shops should be? Even if corona situation settles, do you think you can expect increase in shop traffic again? Or do you think there's more shift towards online sales? Or what is your strategy on this?

So these are the distributors, agents that are our partners, the shops, and they're really working hard. So I think this is a very difficult situation for them. And of course, there's no doubt that there's more sales online. But what I can say is that I have always been saying that there will be 100% penetration of smartphones. But if you want to use PayPay, you have to have a smartphone. And unfortunately, there's many smartphone users in Japan, but I think there's very limited people who are able to master the use of the smartphones. They're not are able to use all the functions. So if you look at the current situations, even the elderly population is shifting toward smartphones. Our partners will probably be needing to be teaching how to use smartphones to make sure that the user are able to use the smartphones. And I think the role in that education of the users is really important. And we have 1,200 smartphone advisers, which are positioned at the shops. So our partners are very proactive, and they're interested in growing the business together. So those who are aligned with us, we want to increase solidarity with them under this corona crisis so that after we recover from the situation, I know that they can really do better, and they will do well. Mr. Shimba, what do you think? You're responsible for this business?

Let me supplement 2 points. There are 3,000 -- 20 shops and 20,000 people who are involved in this partnership. What's important that, we call them crews, but they are able to continue to support the users. I think the employment issue is really important as well. So with regards to fixed cost issues, we are supporting the partners as well. We have already made that decision. Secondly, online, going online isn't just about selling directly to the consumers. Many customers -- users are going to the shops. They have different exchanges. They're able to check and confirm. But you can -- as we are doing on Zoom today, you can actually, for example, inquire through Internet like this, or we can support questions not necessarily at the physical shops, but we can do this online as well. I think we have put in a lot of heads together. So we're -- the management is really meeting together, bringing heads together and brushing up our ideas so that after corona or with corona, our partners are -- and our distributors are our assets. So we want to continue to leverage them. Thank you. So I think it will be maybe more hybrid. So our partners and distributors, agents, dealers, we will continue to collaborate and cooperate together. So thank you so much.

Thank you very much. So with this, we would like to end our earnings results for the fiscal year ended March 31, 2020. This session will be distributed on demand later at our website. Thank you very much for viewing our earnings results report briefing. Thank you.