SoftBank Corp. (9434) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you very much for waiting. We would like to begin investor briefing for earning results for the fiscal year ended March 31, 2021, of SoftBank Corporation. We would like to introduce to you the speakers for today. Board Director, Executive Vice President and CFO, Fujihara. Vice President, Head of Finance and Accounting Division, Naito. Vice President, Head of Strategic Finance Division of the Finance unit, Akiyama. Today's briefing is streamed live on the Internet. Thank you for your understanding. Without further ado, we would like to invite Mr. Fujihara to talk about the consolidated results.

My name is Fujihara, the CFO. Thank you very much for watching this briefing. But our new President had conducted his first results briefing. His specialty is in the area of technology, and he is very much motivated to bring the Beyond Carrier to the second phase. I hope to have your support towards him. Now I would like to give you the explanation on the results for fiscal year 2020. I would like to talk first about the results for fiscal year 2020 and then move on to the forecast of fiscal year ending March 2021. First is the results for the last fiscal year. At the beginning of the year, that was when the COVID-19 impact was starting to be felt. However, we achieved higher -- we committed to achieving higher revenue and income. And as a result, we were able to get the best ever results with higher revenue and higher income. Revenue is JPY 5.2 trillion, and it is JPY 100 billion above the revised forecast. Yahoo and Consumer segments were able to grow as well. So we were able to add on JPY 100 billion to our forecast. Operating income target was JPY 970 billion, and the result was in line with that. Net income was JPY 491.3 billion, almost in line with the revised forecast. The new fiscal year is expected to be a bit severe for us, and we have been conducting various investments. So considering that, we think that our results were good. Looking at segment by segment, if you look at the left graph, all segments posted positive growth year-on-year. Out of that, Yahoo was able to grow JPY 150 billion year-on-year, significant growth. As for Distribution and Enterprise, they were able to grow by approximately JPY 50 billion year-on-year. Consumer increased by JPY 70 billion year-on-year. If you look at the Consumer's breakdown, electricity increased by JPY 50 billion year-on-year. Broadband, JPY 15 billion year-on-year. Mobile and sales of goods and others. Up to the third quarter, they were in the negative. In the sales of goods and others, it was a negative JPY 24.5 billion, and mobile was negative JPY 8 billion year-on-year. However, we were able to get the cumulative of positive growth for those businesses. Next is Enterprise. Overall, there was increase by JPY 50 billion year-on-year. Most of that came from business solutions. The business solution grew approximately 17%. So it is driving the growth. We would like to focus in this area. In mobile, because of the increased demand for telework, it grew robustly. Last fiscal year, if you look at the fixed line and mobile, if we add the 2, there was a negative of JPY 6 billion. This fiscal year, we are overwhelmingly in the positive. And we were able to grow in double digits in those segments. As for Yahoo, in the area of commerce, it significantly contributed by growing JPY 110 billion year-on-year. And media, in the first half it was in a negative. But overall, it came into the positive growth. And the LINE impact is included. If you look at the operating income, there was increase by JPY 50 billion year-on-year. If you look at EBITDA, there was a growth of more than JPY 100 billion year-on-year. In Yahoo, there were depreciation cost increase and also there were booking of impairment. That significantly impacted the results. And also, there was a JPY 12 billion worth of appraisal gains booked last year. So that resulted in the difference between adjusted EBITDA and operating income. If you look at the segment income, Enterprise and Distribution grew significantly. Enterprise had grown by JPY 24 billion year-on-year or plus 28.9%. Consumer grew by JPY 11.4 billion year-on-year. Let's look at the breakdown. First of all, consumers, we have increase of JPY 70 billion service revenues. We had big contribution from broadband. But if you look at cost of goods sold, this is minus JPY 14 billion, much of it is electricity. There was a market deterioration temporarily. So the contribution to profit level was limited. Meanwhile, broadband was plus JPY 15.8 billion. I think it has contributed significantly to profit. If you look at mobile, we had half price support. First and -- half year discount. These are some extraordinary special items which I have explained in the last quarter. But if you exclude that, it's about plus JPY 24.4 billion. So ARPU and time subscribers, this is the right number in that sense. If you look at in expenses, cost of goods, you can see there's a lot of advertisement costs from last October. There was a revised at telecommunication business law and incentives related sales commissions and sales promotion expenses have been decreasing, but this will be written off over 2 to 3 years. And that reduction effect is about plus JPY 35.8 billion. So this has pushed up. And if you look at other expenses, we have COVID countermeasures, personnel expenses. Now Enterprise, you can see it has been driven by increase in revenue, and we have been able to reduce our expenses. Distribution, again, high revenue contributed. And if you look at others, if you exclude the one-off factors, this is JPY 13.8 billion positive in terms of subsidiaries' profit and loss. And Yahoo and Z Holdings has already disclosed the results, so please refer to that. Let's look at net income. Net income has increased in line with growth in operating income. Even though impairment losses have been booked, but we have about JPY 4 billion in impact of financial cost -- or this is interest payment. So if you exclude that, because of the LINE integration, we had temporarily booked taxes and there's a rebound of that. So income taxes has actually offsetted this impairment losses. So operating profit is -- which is uncontrolling, net income attributable to noncontrolling interest is reflected. Now in terms of net income basis, we have 35.5% in terms of effective tax rate, and you can see how each segment looks. Even if you look at it in terms of net income basis, you can see improvement in Enterprise and Distribution. This shows the diversification of both source of revenue and earnings. Let's look at CapEx. Initially we were planning JPY 400 billion, but we will be adding -- by increasing to JPY 420 billion. And we finished at JPY 422 billion. This is the result of focusing on 5G investment. In the new year we are also expecting above JPY 400 billion level. In terms of free cash flows, we will show this more in detail later on. But if you exclude Z Holdings and launch shifts, that was the plan. So the plan was 670 a full year target, but we have finished at JPY 713.9 billion. So the adjustment rate is 107%. So you can say that it has been steady. In this next page and appendix, we have details. So if you can confirm that as well. So among the JPY 73.9 billion, if you exclude Z Holdings in LINE, and if you look at the cash -- operating cash flows, we have the securitization of installment sales, which we do this on balance sheet. But based on covenants and Japanese GAAP is off balance. So we manage the business by adjusting that. Then we have CapEx investment for gross other investments. And if you deduct that, it's JPY 713.9 billion, this is the adjusted free cash flows. Now in IFRS 16, which we will be -- what we have been paying, OpEx will be paid out in investment cash flows. So there's an impact of adopting IFRS 16. So the adjusted cash flow of JPY 589.8 billion is the cash flows in true sense, and you're deducting dividends and then you had the cash flow after dividend payment. So you have JPY 183.9 billion. And this cash flow was -- which used to acquire LINE shares and do buybacks. LINE share acquisition was JPY 175.3 billion, and we did a buyback of JPY 100 billion. So this is the overall income and expenses. This year we had integrated LINE. So there was a big change in our balance sheet as well. I want to highlight some points of the changes in the balance sheet. So first of all, the integration of LINE [indiscernible] impacted SBKK. In terms of total assets, we have seen increase by JPY 1.8 trillion. The breakdown goodwill is JPY 617.1 billion. At Z Holding it's double of that. But because of our holding is only 50%, we have taken 50% of goodwill. So that's why it's half of Z Holdings, which is JPY 617.1 billion. And the PPA intangible, so we have about JPY 407 billion PPA intangible assets. This is the same as previous year. So in any case, because of the M&A, we have an increase of JPY 1 trillion in assets. And if you look at others, it's EUR 732.1 million. There's about unpaid portion of TOB of LINE, about JPY 1 billion or so. So that has been carried over from LINE. So this is very close to what LINE has disclosed. Meanwhile, we have book liabilities. And if you exclude the consolidation adjustment, I would say half of that is the increase in equity attributable to owners of the company. And almost the same amount is considered as noncontrolling interest. So this is the accounting picture. And this balance sheet of LINE, if you actually translate that directly into telecommunication business. So the total asset size is JPY 12.2 trillion. Liabilities is JPY 9.5 trillion. And equity -- shareholders' equity is now JPY 1.5 trillion. I would like to give you the breakdown of the balance sheet. Please take a look at the left sheet. Due to this transaction, the net assets increased. There was increase by JPY 1 trillion in the assets. The net -- the ratio of total equity to total assets is 22.5% now. There has been improvement by 5%. In terms of the balance sheet, it is gradually improving. In terms of the equity ratio, it is 12.4%. It was an improvement by 2.2%. On the right-hand side you see the shareholders' equity ratio. This is a waterfall chart from 10.2% equity ratio to this year's 12.4%. There was increase of equity, which is the nominator. And the net assets -- net income increased, and we -- and there was a 0.4% increase, increase of assets. The denominator, we increased the cash by JPY 150 billion. In addition to that, overall, it was JPY 400 billion, so we added that on. And then the accounts receivables, there was an increase in the asset increase. So there was a decrease by 0.7%. With the impact of LINE integration it became 12.4%. Please now turn to the interest-bearing debt. The interest-bearing debt is JPY 5.69 trillion. And the net interest-bearing debt is JPY 4.02 trillion. There has been an increase by JPY 150 billion year-on-year. With the integration of LINE and also a share buyback of JPY 100 billion there was an expansion of net interest-bearing debt. But because EBITDA improved by more than JPY 100 billion net leverage ratio, as you can see on the right-hand side was improved to 2.3x. From here on is the description of the KPIs. First is subscribers. Smartphone subscribers is 25.93 million, which was increase of 1.79 million year-on-year. The amount of increase is less than last year, but it is still a steady growth. 3 brands had accumulated subscribers. Y!mobile is very strong. I think you can see that in the graph. Next is churn rate. Churn rate for smartphones is 0.98%. Compared to last year, there was a deterioration by 0.26%. There was a telecommunication business act amendment last year. So the subscribers' liquidity had gone down significantly. So compared to that, there was a rebound. However, if you compare it to 2 years ago, there was improvement by around 1%. So in that sense, it is good. Under the new price plan as well as the competitive environment change there are impacts from that, so we would like to do our best under that new environment. On a yearly basis, it is almost on par with the previous year. Next is ARPU. In the fourth quarter it was JPY 4,650. There was a decrease by approximately JPY 70. The breakdown is as follows. There was improvement by JPY 200 of discount ARPU. Unbundling plan had enabled us to decrease the discount. The ARPU before discount is a negative JPY 270. So in the net total ARPU is negative JPY 70. There has been change in the mix with Y!mobile and LINE MOBILE. So that is impacting the total ARPU. So in terms of the first year half year discount, ARPU decreased. In the fourth quarter, the impact was quite small. So you can be rest assured that the situation is improving. Next is broadband. Users increased by 0.53 million year-on-year. In terms of the household, it is 8.14 million. So we would be working steadily to increase this amount. Home bundle discount, Hikari, that is also growing steadily. So there is a positive impact from there. Next is Z Holdings as well as PayPay where we are focusing on. First is Z Holdings. E-commerce transaction is where we are wanting to become #1 in the first half of the 2020s. President, Miyakawa, talked about this as a focus area. Z Holdings e-commerce transaction volume increased by 24.4% year-on-year. And SoftBank payment service, which is also our subsidiary. The transaction volume exceeded JPY 4 trillion for the first time. It is growing double digits. This is PayPay. We have exceeded 38 million in terms of registered users. And annual GMV, which we're disclosing for the first time, is exceeded JPY 3.2 trillion. This is 2.6x year-on-year. So you can see it's in a growth stage and has much more room to grow. So this will continue to grow, and we hope this will become one of our core businesses. In the last section, let me provide you our views on the 2021 forecast. In terms of guidance, the numbers, as Mr. Miyakawa introduced, revenue JPY 5.5 trillion; adjusted EBITDA, JPY 1.73 trillion. Operating income, slightly increased year-on-year of JPY 975 billion; net income, JPY 500 billion or so. Dividend per share is JPY 86. We will continue to maintain this high shareholder returns. At the bottom, you can see a footnote. We have added an item called stock compensation expenses because with addition of LINE the impact has become larger. So we have changed the definition of adjusted EBITDA. If you could take note of that. This number here, operating income, we have the impact of mobile service price reductions. It does have a significant impact. And also with the integration of LINE business we have some impact on amortization of intangible assets, which is more than JPY 100 billion. About JPY 70 billion or so in terms of mobile service price reductions and JPY 30 billion for amortization of intangible assets. Against that, we expect increase in mobile subscribers, Enterprise profit growth, Yahoo! profit growth and cost reductions. With that, I will be able to overcome this and achieve increase in operating income. That will be the big design for 2021. And also from this year, we will be showing diverse business value through enhanced disclosures. Our businesses have really diversified. And we are now seeing businesses that are following a growth track that is different from telecommunication business. So I hope you will pay attention to individual business segments. And that is why we have decided we will provide guidance by segment. Consumer, unfortunately, we're expecting negative in operating income, but we want to be consistent and persistent on this business. Enterprise, this has -- is growing significantly. We're expecting a commitment of more than JPY 20 billion year-on-year growth. But the last year, we hope we can grow by more than 20%. Distribution. Last year, because the growth was quite big, this year, it seems small. But over the last 10 years we have continued to increase. And in fact, over the last 3 years we have been growing by double digits. So we are now expecting this to also be profitable next year. Yahoo and others, you should have the information disclosed by Yahoo themselves. So that's the overall picture. Finally, the shareholder returns. Let me say a few words. Just in terms of our policy on shareholder return, we want to focus on paying dividends. That was how we started when we went IPO. So we made a commitment that we will do no dividend reductions each year. So for 2021-'22, our total shareholder return ratio is approximately 85%. This policy remains unchanged. So this year we're looking at JPY 500 billion in net income, JPY 530 billion in FY 2022. So you can see the calculations on the right-hand side. This is in terms of big grand design, net -- 85% of the net income will be returned to the shareholders. And we have the dividends paid out, and we will do buyback of our shares. And eventually, we will retire them, but this is the overall grand design on the total shareholder returns. So that is all from me on the results and the forecast. So now I would like to take questions and comments. Thank you.

[Operator Instructions] First is Nomura Securities, Mr. Masuno.

The first question is related to the mobile, the telecommunications revenue. The main subscriber net increase will be offsetting the price reduction impact. What is the size of the net increase that you are thinking? And what is the combination of the net increase of the subscribers in SoftBank, by mobile and line? In terms of first and half year discount, the accounting impact will be diminished, and it will be completed this year. But what would be the impact, positive impact from it?

There is a decrease by JPY 70 billion. And from the operating income, Consumer was a negative JPY 16 billion. So we would like to have as many subscription as possible. And Y!mobile is quite strong out of the 3 brands. LINE MO is working very hard. But compared to other companies, I think it would be better if you look at Y!mobile and LINE MO together, I think Y!mobile will contribute greatly to the improvement. As for SoftBank brand, it will continue to grow as well. So that's the overview of the environment. As for the first year half year discount, we have made a disclosure of this. There was a negative impact of around negative JPY 34 billion, and that would be converted to the positive because this impact will disappear.

I would like to make a confirmation. So the decrease by JPY 70 billion, you would be able to offset that. And also with the disappearing of the negative impact of JPY 30 billion from the first year, half year discount, that would be a positive impact, right?

We need to balance everything to manage the situation. We want to grow broadband service subscribers as well. With that in mind, we have created the full forecast. We have to think about the competitive environment as well, and we want to pursue the upside. But what we can commit to is what we have disclosed.

My second question is related to competitive environment. The sales promotion that you're conducting, I think that there was a lot of promotion in the fourth quarter. There were many price competition, service competition. And the assumption for the sales promotion, how do you view it? So due to the MIC policy, I think that there may be some impact from that. But what is the directionality of the sales promotion cost? Would it increase or decrease?

It depends on the environment. But there was a plus JPY 36 billion year-on-year impact from the sales promotion. So -- but the improvement was quite big this fiscal year. So next fiscal year, it would not be as big. The first year half year discount disappearance -- impact disappearance will have a positive impact. But compared to the previous year, it may not be as big in terms of the improvement. So we have to think of various things. So the sales promotion will be positively impacting the performance. So I don't think that there would be a reduction in the income, but I would like to wait and see.

Next is Daiwa Securities, Ando San.

I have 2 questions. I want to follow-up on Mr. Masuno's question. So the impact of JPY 70 billion or so on the mobile price reductions, if you break this down, in particular, what's the downgrade portion? How much would that be? Can you elaborate on that? The second question, churn rate, Mr. Fujihara, you explained that you have -- that you see both churn rate, churn and new acquisitions. So what is that exactly? How should we understand that when you mean that? So what is the competitive landscape? Well, I mean, they were both in a competitive state. But how are sort of the changes that you see? Can you elaborate on that as well?

So that's brand switch. So we see migration from SoftBank to Y!mobile. We think that's relatively strong. So we can't say for sure, on a full year basis I think it's too early, but I would just say the so-called downgrade trend will increase, and we're making that assumption as we do our business. Which means that reversely, we can -- we have been able to prevent churn with Y!mobile. So we want to do different analysis and render judgments accordingly. With regards to the churn rate that I have mentioned earlier, you have the new acquisition and the churn. In the new year, and I believe this is true with industry. But I don't think it's strange if -- I don't think it will be strange to think that we will see increase in both churn and new acquisition because of the increased liquidity or mobility.

I want to have a -- I have a follow-up question on that. So JPY 70 billion, downgrade takes a big portion of JPY 70 billion. And against that assumption, how is it right now? I guess your explanation is that you see a strong trend towards downgrade at this point in time. Is that true? And also, you said that there's an increased industry-wide liquidity or mobility. So do you see migration or competition in the same sort of percentage that you have seen in the past? Or is that different? Is that changing?

If you [ slice out ] downgrade, I don't want to say anything definitive about it. But if you look at the initial move, against the JPY 70 billion, I would say it's in line with our assumption. However, this is going to be a long-term challenge. So we need to be sure that we manage this well. And your other question was what?

The second question was, so you win and you lose, do you see that same trend sort of -- even though the liquidity is increasing, do you think the same percentage of wins and loses?

Well, I'm not sure. You have to look at it from a different perspective. But in March, Rakuten was offering free communication charges. So I think we saw a stronger trend for that. But then April is different again. So we are now competing fairly and soundly, and we will do our best to do what we can to prevent churn.

Next is from SMBC Nikko, Mr. Kikuchi.

Y!mobile's sales promotion and marketing, I think it is stronger than the other company sub-brands. The -- it seems that the decrease in the income will be -- will continue to linger. And this year there was a negative impact of JPY 70 billion. And I was wondering how much of that will linger in the next fiscal year. There was the increase in the income from mobile business. But maybe next year the mobile business increase may be calming down. So I was wondering how you view this? That's my first question.

So it is very difficult to assert what will happen. In 1 year not all of the customers will migrate. So we assume that there would be some migrations occurring in the coming fiscal year. As for Enterprise, there would be a growth from JPY 117 billion to JPY 128 billion. And the year after that, JPY 150 billion. And we believe that the growth of Enterprise will accelerate going forward. That's what we assume. As for the Z Holdings, due to PPA and stock option and amortization, there was a negative factor of JPY 30 billion. But next year, this negative factor would be stayed. So that would work in the positive. So there are many factors that would put a pressure on us. So with that in mind, we would need to consider how our business would be.

I have additional question. The increase in revenue for 4G, there was an increase in the revenue significantly in mobile. And the cost of goods was quite high. And next fiscal year, the growth in this area, or the second half of this year's growth, the marginal profit maybe not so big. So in terms of the growth of the mobile business, could you elaborate on that a bit?

So in terms of the Enterprise segment, compared to the Consumer, the Enterprise movement for smartphones is still lagging behind the individuals. It is only about 60% penetration. So we believe that the Enterprise business will grow in terms of a provision of the smartphones to those companies. I think that the momentum is that it would be 100% smartphones in the future. So I believe that there would be upside for Enterprise. I don't know how much we would be able to capture at SoftBank Corporation, but that's how we feel.

My second question, is the strategy for IPO of the subsidiaries and PayPay. So PayPay will be consolidated next fiscal year. And how much impact would that have on the SoftBank corporation? You would be acquiring shares from SoftBank Group. You will be paying the SoftBank Group, but you will be having the -- you will be having the IPO or PayPay to offset the payment. And what will happen to the return to shareholders? So I was wondering what your policy was for the return to the shareholders because it seems a bit confusing. The 3-year average of the dividend payout ratio, we understand what's going on, but comparing last year and this year the payout ratio is smaller. The shareholders may feel your policy confusing. You talk about the 3-year average, but it's still harder to understand. So the return to the shareholder policy. And how you would be returning the cash that you gained from IPO or PayPay to the shareholders? Any ideas?

In terms of the IPO of the subsidiary, it is just on hypothesis. So we would not be able to clearly state on that. So we want to consolidate PayPay. And what that means is that we will put it as a core business. So it is not that we want to have the IPO to gain a lot of value from it, but rather we want to place it into the core of the business. So next is about the 3-year average. The share buyback is something that is necessary for us. So the yield was 6% to 7%, and that determines the share price. So we had to think about the supply and demand situation, and we looked into various options, including share buyback. So rather than having a fixed amount of the share buyback each year, we wanted to be more flexible in deciding the timing, which is the best for us. The dividend yield is around 6%. And I believe that level is quite high. We want to have a stable dividend, and we will not be reducing the dividend. We want to be flexible.

Next is from Goldman Sachs, Tanaka san.

My name is Tanaka from Goldman Sachs. I have 2 questions. First question is on operating income of Consumer business. Of course, you said demand will increase subscribers. But do you plan to implement cost reductions? How do you plan to constrain expenses? So can you give us your policy on that?

So first of all, with regards to network related overall operations, we're planning on JPY 20 billion or so on overall cost reductions. And on the Consumer side, there's a pressure on revenue. So we are reexamining different cost reductions. So even the segment and even on a company-wide basis, we're very sensitive towards cost, and we will implement necessary cost reductions.

I have a follow-up question on that related to cost. Your CapEx plan for this year, so you had additional JPY 20 billion for 5G investments. So altogether, it was JPY 420 billion. Last time you said that you would like to keep the CapEx of JPY 400 billion. So what is your thinking for this fiscal year?

We are looking at JPY 400 billion. So our plan remains unchanged. If I may supplement on cost, so head office relocated. And so space is -- there's more space efficiency. And I think that in itself will generate few billions of yen in cost reductions.

My second question, with regards to Enterprise business where you're expecting growth, I think you said you have been able to do good cross-selling to mobile users. So in the solutions business, one is a successful cross-selling business. And can you give us some idea, color on room for expansion?

So in solutions we use smartphones. And of course they want to enhance their network, and they want to do cloud. We have different cloud businesses which we offer so we're able to meet different diversified needs of the customers. So that's where we are able to be successful in cross-selling. And we want to add on different IoT products, and security is essential. So we are able to sell security products as well. So we are able to deepen our relationship with Enterprise customers. And digitization is not just about cost and operational efficiency. But on the marketing side, it really helps the customers increase their sales through digital marketing. So having an account and the sales forces are really building up on success cases. And while the competitors are changing, we're able to really build confidence on this. So that is why Enterprise business is really in the growth stage right now. And I hope you can really understand that.

I have one more question on the Enterprise mobile. You said penetration rate is still low. So you said there's much more room for expansion. So that Consumer side. But in Enterprise mobile business, what are the differentiating factors? And what's the potential for you to really grow in this business?

Yes. We are able to offer on a total package basis. So for example, Yahoo!, LINE, these are products as well which we can add on, which we can deliver and offer to our Enterprise customers. So our sales forces have this comprehensive capabilities. And also, we have been renting out handsets. So these are sort of the troublesome areas of the enterprises which we can really solve and ease -- provide ease for the Enterprise's customers. So this is a total service that we provide to the Enterprise customers, and that's where I think they support us.

Next question is from Citigroup Securities, Mr. Tsuruo.

There are 2 questions I would like to ask. This fiscal year, the net increase of the smartphone subscribers. Last fiscal year was 2 million, and this year it was 1.8 million. And third and fourth quarters were about 400,000 each. There were pressure, I believe, from Rakuten. So how do you believe that the coming year would look like? Related to that, 5G subscriber acquisition, how is it going? How would it be impacting positively the ARPU or not? I would like to know about that. There are many questions, but that's my first question.

We don't disclose the specific numbers, but 30 million smartphone subscribers by 2023. So now we have close to 26 million. So if the increase is JPY 2 million, that would be close to achieving the goal before 2023. There would be change in the competitive environment, of course. So each quarter we would like to do our best. And that's all I can say for today. As for ARPU -- before that, in terms of the 5G, initial movement is as we have expected. The other carriers have been in the same situation. And as for 5G and 4G, we decided to have a price plan which is very simple. We are selling the 5G handsets to our customers, and it's an advanced investment. As the network is more and more developed than we would be able to acquire more customers, as Miyakawa mentioned. We would like to capitalize on various assets within the group. That would be the key to our success. Yahoo!, LINE, PayPay, we would like to get everyone on board so that there would be more smartphone subscribers.

My second question is related to dividend. As you have said, your company's policy is not to decrease the dividend. So what would be the conditions for increasing the dividend? The interest rate will have a pressure of moving upward. And the telecommunications business, consecutive increase in the dividend in the telecommunications industries is critical for the investors. So would you elaborate on that?

So if we are considered a telecommunications company, I think that would be relevant. But we are growing in the other areas, like Enterprise. It's growing 20% to 30%, Z Holdings, PayPay. It's different from telecommunications business, but it's growing. So we have to -- you have to ask whether we are a pure telecommunications business. We have many areas of growth. So there are times when we need to conduct investment for growth for the areas where we believe we can grow. Of course, dividend is a very important factor. So we will not reduce the amount of the dividend, but we have to think about it in package with the growth for the future. So in terms of what we will do in the future, we will make optimal decisions as we go.

Next is Takahashi from UBS Securities.

This is Takashi from UBS Securities. I have 2 questions. First, on Consumer business. The segment profit in the midterm direction of the profitability, when you look at how MIC is moving, I think they're trying to implement measures and structures in place where there's increased mobility of the users, subscribers. And if you want to be profitable in both -- well, increase both revenue and profit, when do you think the consumer business will become profitable? So that's my first question.

Well, to be honest, we're looking at different scenarios. Of course, we want Consumer segment to contribute to JPY 1 trillion as much as possible. But price, you have to look at year 1, year 2, year 3, I think we will be receiving substantial pressure. And we have the competitive environment. Meanwhile, we see progress in 5G. So we have to look at what we can do as a group, and we have this platform, foundations of what can leverage -- how can we leverage that. So we have a lot of different challenges. So I think if you just look at how do we break through this pressure, I think that's being questioned to us. In any case, we have Enterprise business, and we have other growth areas. So with the growth engine, we will continue to seek growth opportunities. And meanwhile also continue to revamp Consumer segment.

Understood. In earlier session in investor briefing, Mr. Miyakawa said that JPY 500 billion in targets. Do you have any other special factors that you have in place for operating profit?

In terms of net income, it could be positive or negative because of some valuation gains or losses. So it's different from operating income. So I think we're somewhat conservative for net income. And I think that's what Mr. Miyakawa had in mind. So he -- that's why he said if everything goes well, then we can increase. I think that's what he meant. In any case, we will provide you with update. So I hope that this number is the floor, the bottom, that minimum we will achieve.

Next is from SBI Securities, Mr. Moriyuki.

This is Moriyuki from SBI Securities. I would like to ask about ARPU first. Downgrade migration was discussed earlier in the presentation. Is it okay to understand that the migration for downgrade is coming from SoftBank? So you said that Y!mobile and LINE MO are also strong. So there are not many downgrade from Y!mobile. Is my understanding correct?

Y!mobile is quite strong. So your understanding is correct at the moment.

I understand about the downgrade. What about upgrade? The price is more reasonable. So I think that there are some upgrade migration. There would be 5G penetration as well. But what -- how did you factor in the upgrade in your performance?

We would be conducting various initiatives in that area. We now have 5G as well as various contents. And these need to go hand-in-hand in order to improve the performance.

So you don't -- you are not factoring in much positive from there?

Downgrade and upgrade, that's -- your understanding is correct on those points.

In terms of the cost reduction, you talked about various examples. But what was the size of the cost reduction last fiscal year? And this fiscal year, what is the size that you're envisioning for cost reduction? Is there any changes in the major items?

Last fiscal year, during the moving from the former headquarter to the new headquarter, there was the double payment of the rent. So that will be disappearing. So -- and each year we are looking into tens of billions of yen of cost reduction. But of course there are factors for cost increase because we are conducting various advanced investment. So we are trying to keep things flat from what we are spending on the growth investment and the cost reduction. In the new fiscal year we will be doing new things in various fields, not just the cost-reduction measures. But there will be a reaction from last fiscal year.

So is it okay to understand that tens of billions of yen, a positive impact will be seen?

But for the headquarters cost, it will be true. But for network, we will be making investment. And also, in terms of the sales environment, there was some accumulation of expenditures that we have made. So that will be -- that will not be the case this year. So that will be working in the positive.

Next is Eguchi from Credit Suisse. Okumura San from Okasan Securities.

I have 2 questions. This is a repeat of the earlier questions, but just give us your thinking on how the consumers will increase on a net basis in the consumer segment. So I think it will be difficult for you to achieve what you were planning to. So what kind of customer targets are you aiming for going forward? And what are you going to do to really attract these customers?

Compared to competitors, we have 3 brands, and we have been doing the 3 multibrand strategy for a long time. So how do we leverage that multibrand? I think this is where we believe is our strength, and we want to really leverage that. In particular, Y!mobile is good for new acquisition, it's very competitive in that sense. And I think it's very well-penetrated. So this will be our growth driver. As for LINE MOBILE, LINE MO, now that line is our subsidiary, we will be able to have collaboration in true sense with LINE, and we need to really reinforce that. With regards to SoftBank brand, we have 5G network, and we're planning to do this very proactively. So in many sense, we can build advantages over others. So we want SoftBank to be known as strong in 5G, then I think we will be able to really shine out in -- with SoftBank brand as well. So each of the 3 brands have its own characteristics and roles to play. And I think that's our multibrand strategy. Most recently, if you look at new customers, I think we have been able to do -- compete well. So we want to challenge different markets.

The second question, I want to also ask about dividend. So you maintain same JPY 86. Now if you have an upside on your net income result, will you be increasing your dividend payout? Because your policy is to basically implement what you set out at the beginning. So you generally have not been changing or you will not change your dividend, even though if there's an upside, is the thinking the same?

Yes, if there is an increase in net income, we will of course decide accordingly, but we will of course have share buybacks. But if there's increase in profit, we have to look at the quality of the profit as well. It could be -- is it something that the valuation gains? Or is it a gain in true sense? And we also have to look at dividend payout as well. We may have to increase dividend. But again, we have to also maintain our consistent policy of stable dividend. So we will take all of these things into account.

Next is Daiwa Securities, Mr. Ohashi.

This is Ohashi from Daiwa Securities. I would like to ask about 1 point on the financials. Net leverage ratio. You talked about the objective or a target of controlling it within 2.4x. But in the mid to long term, how would you be controlling the net leverage ratio? In terms of the structure of the balance sheet, in the corporate action, there has been some change. In the mid to long term, what is the target for equity ratio that you have in mind? Those are -- that is what I would like to ask you.

Net leverage ratio, there was an increase in the adjusted EBITDA, and we were able to improve it more than we had expected, 2.4x is something that we would like to keep in order to secure the credit ratings. So in terms of the equity ratio, the impression is that it's quite low. So if there are opportunities, we would like to work to improve it. So we would like to pursue various opportunities for the improvement of various KPIs. So we have -- we are motivated to improve.

We have Mr. Kinoshita from Bank of America Securities, BoA Securities.

I have a question on your policy on shareholder return. Next year you will be completing your 3-year average, our 3-year plan. And you said that your policy remains unchanged at around 85% in total shareholder return. And Mr. Fujihara, going forward, you said that you're talking about wanting to do different policies. You want us to look at it on an [ SBB ] basis. But your current policy today, do you think you will be reviewing this on a 0 basis? Or perhaps you will reexamine? Or for example, maybe you will maintain your policy on no dividend reductions. Can you -- I just have one question, give us your thinking on your total shareholder return.

I would like to refrain from speaking on a temporary basis. But we have never discussed at least internally on reducing our dividend because in the Japanese market we understand how it will be perceived by the capital market if we did reduce dividends. So we will be very cautious on that approach. When we went public, when we were asked about our equity story, we said stable, high shareholder return and growth, that we will pursue them at the same time. So there's no fluctuations, no change from that large thinking.

From Credit Suisse, Mr. Eguchi.

My name is Eguchi from Credit Suisse. I have 2 questions. First is related to subscribers. Yahoo -- Y!mobile is doing well you said. President Miyakawa talked about in the presentation that the strength of the SoftBank Corporation is being a platformer. And -- so how do you view yourself? Do you think that your strength is really from the -- being a platformer?

Yes, I believe so. We are conducting various initiatives with Yahoo. We wanted to grow Yahoo! Shopping, and we utilized the customers of SoftBank to drive the growth of Yahoo. And we are trying to increase the new subscribers to SoftBank as well as to retain the customers through initiatives with other companies like PayPay. And we have been able to create synergy for doing that. I think that we can create a win-win situation. But rather than having an ecosystem, we want to provide service universally. And we want to have each company to grow on its own. And by being in the SoftBank Corporation group, they would be able to capitalize on the strength of the group. PayPay is not a service, just 4 SoftBank customers. SoftBank customers are a minority as part of the PayPay customers. The same is true for LINE and Yahoo, but we would like to create a synergy by working with those entities.

You talked about there were many downgrades. But considering the future, each brand will be universally be strengthened. And you don't think that those brands need to change?

The 3 brands are -- should be growing, ideally growing on its own. That's how we view it.

My second question is related to SDGs. So your target is 2030 carbon neutral. I think that you are moving very fast to go in line with what's going on in the world, and there are 6 actions. And I think that would be impacting the finances in the future. And Mr. Miyakawa was talking about new business. But what is your view on that, inclusive of the KPI? Can you explain?

We want to add to our mission. We have the -- we are clearly saying that we want to become the corporate group needed most by people around the world. So we are making discussion about SDGs very aggressively. And our new president is very motivated to work in this area. For these 6 actions, there are various KPIs being created. So last year we had been -- we had been ranked quite high, and we were able to evolve in the area of SDGs significantly, but we have to think about what we can do now. And I'm hoping that we would have opportunity to talk about this separately. In terms of the financial impact, we are hoping to issue ESG-related bonds. And we hope that there would be some positive impact in that area.

So I am looking forward to having a disclosure of KPI.

So with this we would like to end the Q&A session. Thank you very much for many questions we received. So with this, we would like to close SoftBank Corporation's investor briefing on the earnings results for fiscal year 2020. [Statements in English on this transcript were spoken by an interpreter present on the live call.]