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Operator: Thank you very much for waiting. We would like to begin SoftBank Corporation Earnings Results Presentation for the 3 months ended June 30, 2025. We would like to introduce today's attendees. SoftBank Corporation President and CEO, Miyakawa; Board of Director, Executive Vice President and CFO, Fujihara. Today's presentation will be broadcast over the Internet. Now President and CEO, Miyakawa, will give an overview of SoftBank consolidated financial results and business overview. Miyakawa from SoftBank.
Junichi Miyakawa: Thank you so much for your attendance today. I would like to begin by presenting our consolidated financial results for the first quarter of fiscal year 2025. Since we've already shared our strategic vision at the shareholders' meeting and SoftBank World, today, I'll focus primarily on our financial performance. First, revenue came in at JPY 1,658.6 billion, an 8% year-on-year increase with 25% progress toward our full year forecast. And given that our earnings typically rise in the second half, we believe this represents a strong start to the year. Looking at the breakdown, all segments saw revenue growth. Notably, our distribution and financial businesses each grew by more than 20%. Operating income was more than JPY 40 billion due to the gain on loss of control of LINE [indiscernible]. Excluding that, we still achieved a 6% increase in operating income. Our progress on operating income has reached 29% of the full year forecast, showing steady advancement. As you can see, all business segments performed solidly. Only the consumer business posted a slight 2% dip in profit due to provisions, but we expect a rebound from the second quarter and maintain our outlook for full year growth. And net income, excluding onetime factors, also showed a modest 1% increase. We are progressing well with 27%. To summarize our progress so far, we are off to a good start toward achieving JPY 1 trillion in operating income. Here is how each business segment is tracking. As you can see, progress in all segments is above 25%. Now I would like to take a closer look at performance by business. We'll start with the Consumer business. Revenue reached JPY 717.8 billion, up 5% from the previous year. Mobile services, in particular, continued to grow, adding another JPY 5.2 billion in revenue. Operating income in the Consumer business reached 28% of the full year forecast, putting us on a solid path toward our growth target. Smartphone subscribers rose to 31.95 million, a 3% increase with net additions continuing to exceed 1,050,000 year-on- year. Next, the Enterprise business. Revenue came to JPY 233.8 billion, a solid 8% increase, driven by strong solution sales, which grew 13%. Operating income grew to JPY 48.8 billion, up 18% year-on-year. In May, we announced a business partnership with Sumitomo Mitsui Card, through which we will provide digital services to their Olive members. We are working closely with PayPay to build what we call a grand coalition of payments, leveraging each of our ecosystems. We are moving forward with plans to implement this solution in Sumitomo Mitsui Card's contact centers. We also expect this to be the first real-world application of our AI contact center call center solutions. Next, Media & e-commerce business. Revenue was JPY 406.9 billion, up 2%, with growth across all areas of the segment. Excluding onetime factors I mentioned earlier, operating income grew by 6%. Next, Finance business. Revenue was JPY 91.3 billion, showing 23% growth. Operating income reached JPY 18.1 billion, achieving more than double the result of the prior year. PayPay's gross merchandise value rose 24% year-on-year to JPY 4.5 trillion. And PayPay's EBITDA increased to JPY 21.9 billion, up 87%. As for PayPay Bank, which is performing well, we are also expanding collaboration with PayPay Bank, encouraging account openings through integration with PayPay accounts. For SoftBank's smartphone users, we've introduced preferential mortgage rate plans, supporting the growth of outstanding loan balances. In July, we issued our first-ever foreign bond, raising USD 1 billion. Thanks to strong investor interest and with an access to foreign markets, we were able to diversify our funding options. And thanks to strong investor interest, we were able to fund at rates comparable to domestic funds. In summary, excluding one-off factors, we achieved both revenue and profit growth. For the first quarter of fiscal year 2025, progress to the full year forecast for operating income and net income were 29% and 27%, respectively. Backed by the strong performance of PayPay, operating income in the finance business more than doubled. With the issuance of foreign bonds, we've successfully diversified our funding sources. That was a quick presentation today, and thank you very much for your kind attention, and we'd like to take your questions from now on.
Operator: We will now open it up to a Q&A session. Questions will be taken first from the audience from the floor, then from the Zoom press, followed by Zoom analysts, institutional investors. [Operator Instructions].
Unidentified Analyst: ITmedia Mobile, my name is Kaneko. It's not related to the earnings presentation, though. I have a question about admin fees. NTT Docomo, in August, they announced that they would amend the admin fees. And SoftBank has also announced, after announcement by Docomo, it says on the website, it says free of charge. But on web, SoftBank charges the admin fees. So charging fees even on web for ordinary consumers or those who are in the process of the contract. So how would you like to explain to them?
Junichi Miyakawa: Thank you for your question regarding the admin fees. As for the web admin fees, there is a cost for security measurement and also the self-identification confirmation and also the management fees for a payment transaction. So even though we have been doing the free of charge on that, but now we have decided to start charging. In order for us to improve our services even further, this was a must for us. I hope you could understand. So regarding the announcement, we are going to announce in many different tools and channels, so that we can penetrate this information to as many people as possible. Thank you.
Operator: Any other questions from the floor?
Unidentified Analyst: [ Ono ] from Yomiuri Newspaper. I have a question about admin fee or cost in general. Due to increasing cost, Miyakawa-san has mentioned that you consider raising prices. At the moment you decided to raise admin fee, but tariff remains the same. So I wonder why you raised admin fee first before raising tariff. That's the first question. And second, looking at competitors, Docomo raised tariff, whereas KDDI raised communication fee. So competitors are taking different approaches. So how do you see the market dynamics and competitors move? And going forward, other than admin fee, is there any possibility that you transfer the raising cost to something to be charged?
Junichi Miyakawa: Yes, because of increasing costs in general, we decided to raise admin fee. And of course, we want to raise salaries for the staff at retail shops. And we made a decision finally to raise admin fee. The purpose of raising admin fee was the previous question and I'll try to address the question as much as possible, as open as possible. For the industry to grow in a healthy manner, I think revising a lot of fees are possible options. And of those options, you may wonder why only admin fee that you raised. We are trying to figure out the best way. And we had news that minimum income would raise by 6% across Japan. And looking at maintenance cost and our labor cost, there are reasons why we may need to raise compensations and eventually raise some prices. But again, we try to figure out the best timing, at the best rate when we decide to raise prices. We are struggling currently. Now is the good time or not? That's the question we are asking to ourselves. But I don't think that it's a good idea to have all competitors -- all mobile carriers are doing the same. So we try to find a way whereby customers would prefer us to other carriers. So once we reach a conclusion in our discussion internally, we will try to communicate with you. About competitors taking different approaches. The question about will we raise prices -- are we going to raise prices? Or are we going to launch new services and products? We are discussing and considering, but it's too early to say anything concrete at the moment.
Operator: Next question.
Unidentified Analyst: Hokkaido Newspaper, my name is Takahashi. This is not directly related to the earnings results, but the other day, SoftBank announced about the GPU configuration utilizing NVIDIA's GPU. And so what kind of services you are thinking about providing? And widely, what is your AI strategy, of which the Rapidus, one of your AI strategies? And what is your thoughts on the direction of the Rapidus?
Junichi Miyakawa: Regarding GPU utilization, so now we have prepared 10,000 GPUs, and we are also building data centers as well, which is in progress. Under our plans, the service deployment and the computing infrastructure, which is demanded by the society. And considering those, we are planning to increase. And in the meantime, there are cases where GPUs are used mostly on AI related. For us, Sarashina mini, our homegrown LLM, has been established. So this is to be rolled out. We have secured enough GPUs for that. So in the second half of this fiscal year, we are going to install AI on to it. Also, Cristal orchestration of Agentic AI will be ready. So considering its operation, the current GPUs is not enough. So considering the infrastructure, so we'll be utilizing GPUs as service. Also, you mentioned about Rapidus. The other day, I also visited Hokkaido and joined the inauguration ceremony of Rapidus. It's a huge factory with great equipment and advanced technologies are embedded -- equipped. So this is the Japan thing, very unique. So they have a solid strategy. So I'm very much looking forward to their future. And our positioning to Rapidus is that in Tomakomai City, we are constructing the data center. And now the foundation of the first structure construction has just begun, so which will be used for data center. So the NVIDIA GPU chips will be used for now. But in the future, once Rapidus could make high-performance chips, then we would like them to deliver right next to their factory at Tomakomai, so that we can build our Japan's ecosystem. That's my dream. And so therefore, we also have invested in Rapidus as well.
Operator: Next question on the venue.
Unidentified Analyst: [ Sano ], a freelance reporter. I have 2 questions about the Consumer business. You talked about tariff earlier, like Docomo and KDDI. Due to a strong churn of low rate plan, they decided to cancel low rate. So for your case, do you see increasing churn for the low-price plan with low volume of data?
Junichi Miyakawa: Yes. Like our competitors, we have low-price brands, LINEMO and Y!MO, especially SIM stand-alone plan is something that value- focused customer would pick, but we are looking at a similar situation as other competitors are seeing.
Unidentified Analyst: With that, what's the positioning in the future for your low price plan?
Junichi Miyakawa: Like I mentioned before, we want to start from products that are affordable to users and get customers as many as possible. And once they get used to using data, they might upgrade the plan to a higher plan. And we are looking at a steady brand migration from low to high. So entry point should be something that is easier for users or customers would pick. So that kind of positioning is remaining the same for us.
Unidentified Analyst: Then the second question, looking at Opensignal report, 5G SA network quality. There is a comparison between KDDI and SoftBank and the rating was higher for KDDI than SoftBank. So what's your view on that? And especially what's your view on 5G standalone since you have limited bandwidth compared to other competitors. So again, going forward, could you let us know your strategy with 5G SA?
Junichi Miyakawa: So Opensignal's comparison is looking at only mobile operators in Japan for some reason. So some other carriers may be unhappy with that. So I don't know whether Opensignal's comparison is fair or not. But regardless of that, SoftBank does not allow losing to competitors. So we take the results seriously. And we've got a lot of excuses from my people, but I reject any excuses from our people. So I think it's good for us, mobile operators to compete each other for better quality. As far as SoftBank is concerned, reliability is one of the things that we focus on. But the report evaluated our reliability highly, which we are happy with. We have a corporate policy around reliability. Sometimes we build network focusing on speed. Sometimes you may want to build a network to have a better capacity. So again, our rate in terms of reliability was high, and I'm happy with that. Talking about 5G standalone, that's not something special. We'd like to migrate to standalone as soon as possible and low latency and slicing technology can be fully leveraged with a standalone basis. So we try to migrate our network to standalone as soon as possible, but it is still taking time.
Operator: Next.
Unidentified Analyst: Tiffany [indiscernible], Yamamoto. I have 2 questions related to communications. So Docomo and KDDI renewed their pricing. So what about SoftBank? Is there any change in the customers' acquisition? The second regarding the carrier shops. So you also mentioned the increase of the wage and the number of shops. And what do you think about the role of the physical shops?
Junichi Miyakawa: So looking at other carriers. MNP, we also can get their data. So based on that data, NTT is doing well. However, what is the major cause or the factor of the increase of acquisition? The price should be the main factor. So the answer should be that is pricing. But for us, we have a strong wish to increase price. But if that can be accepted by our customers or not, that is everything that we are concerned about. So we have been considering thoroughly, but we haven't taken any actual action towards that yet. So your second question about carrier shops. For us, it's been the number of the carrier shops being flattish for us. We are not thinking about reducing the number of carrier shops, because we highly place their roles as an important contact point to the consumers. we hold smartphone classes for the elderly, so that we do not have to put anyone behind. So now regarding this how to use smartphones right now, but it will be advanced to how to use AI. And even further, it could be selling robots or autonomous vehicles. That would be possible. So at the time of implementation of AI, there will be another wave coming. So including the education to our crews, we would like to put our efforts on.
Operator: Next question.
Unidentified Analyst: [indiscernible], a freelance writer. A follow-up question on that. Impact from competitors' price change. KDDI slashed the lowest price plan and also Docomo canceled the low price plan as well. Then from your perspective, Y!mobile might be able to have a chance to get customers from them. So I wonder would that be the positive impact on your MNP?
Junichi Miyakawa: Well, we have been performing well in terms of MNP. So that was not particularly the reason why we had a net gain in terms of MNP. But Y!mobile is performing well in general, but the low data volume plan or low price plan, the stronger competitor would be Rakuten. So in that sense, we are competing against Rakuten in the area of low price plan.
Operator: Any other questions?
Unidentified Analyst: Bloomberg, MJ. Two questions. It's not directly related to the results, but regarding Rapidus, so right now, are you thinking about any additional investment on Rapidus or not?
Junichi Miyakawa: So today, questions are either telecommunications or this kind of thing, not related to our business results. Well, regarding Rapidus, we've invested JPY 1 billion in the first round. The second round, yes, we have been requested. I'm thinking about doing our best. That's because, in Japan -- so they have come together to rebuild the semiconductor industry once again in Japan. So within our limits though, so I would like to do our best.
Unidentified Analyst: So it means that there is a possibility for additional investment?
Junichi Miyakawa: Yes, but I cannot just decide by myself because it has to go through our Board members.
Unidentified Analyst: The second question is about PayPay IPO timing. So what's your thought on that?
Junichi Miyakawa: So about this, as of now, I cannot talk about it. So when the right timing comes, I would like to give you an update. Thank you.
Operator: Next question.
Unidentified Analyst: Ishikawa, freelance journalist. A question about price, again. I hear that Miyakawa-san turned out to be a winner because competitors raised the price and that may have given you a strong flowing wind. Have you changed your mind to raise price like other companies did? And we are looking at the right timing? Next question is about HAPS. You had worked so long on aircraft type, but you changed the balloon type because of you don't want to lose against the competitor?
Junichi Miyakawa: We were looking at both options, balloon and aircraft types. And Google used to have a balloon project, and we worked with them before. And we found pros and cons in either hardware or aircraft or balloon. We changed the plan from aircraft to balloon because we found that we could get the regulatory permission to fly balloon. We thought it will be very, very hard to get regulatory approval to fly balloon. And the first-come-first basis was, in general, when it comes to aircraft or regulatory permission in the airspace. And it has been taking so long to get regulatory approval to fly aircraft. It may take as long as 2029. But we found that there was a maker in the state to get a regulatory approval to fly balloon soon. So we applied ourselves, and we got a positive response. So we decided to start with balloon. But the fundamental technology can be applied to both types, aircraft and balloon. So motors, batteries and solar panels, those 3 important tools can be usable in either case. So that was the background behind our decision.
Operator: Any other questions? Well, today, no questions about the figure number. I thought we did really well, though. Well, the questions. We would like to take questions from the Zoom press. [Operator Instructions] Freelancer, Suzuki-san, please unmute and ask your question.
Unidentified Analyst: This is Suzuki, freelancer. Two questions. So PayPay, 70 million users been acquired. And the PayPay Group has been structured. So since before, you said that PayPay can do even better. So now looking at IPO in the near future. So what is your thought on PayPay?
Junichi Miyakawa: Well, Nakayama-san of PayPay, we have discussions very closely. And now it's the very, very critical phase. So it's not the right timing for us to talk about. So the positive factor of PayPay's growth is the expansion of GMV, which followed by the increase of revenue. And that's why their performance is well and the growth speed has been accelerated. Also, within the support we can do, the other financial services to be grown, if there is area we can support, then we would like to provide support for them.
Unidentified Analyst: So for now, you mentioned that support, you mentioned for PayPay. What kind of support you are thinking about?
Junichi Miyakawa: Well, it's actually related to a strategy. So I just want to be brief on this because I'm concerned about PayPay's IPO.
Unidentified Analyst: So the second question, if you could answer to, SoftBank's AI solution and the insurance, health care as well. So in 2025 was the time line for that. So what is the status of that? Do you have any vision on that?
Junichi Miyakawa: Regarding the contact center, it will be implemented by the end of the year. And other services, once a system is made, then the service will be provided. So the earliest will be within this year or early next year. It's not really far. Thank you.
Operator: Next, we'd like to start taking questions from analysts and institutional investors. The first, Masuno-san from Nomura Securities.
Daisaku Masuno: My name is Masuno from Nomura Securities. I have 2 questions. First, about earnings results. The Other segment, the loss of JPY 12.4 billion, which was smaller than I thought actually. I believe that you're going to invest more and more and you may need to expect more red numbers for the full year and also GPU. You mentioned that you use whole GPU resources for internal purposes. But at the AGM, you mentioned that you would launch GPU as a service next year as a commercial offering, and you may need to expect some net loss in the segment once you start offering commercial GPU as a service.
Junichi Miyakawa: Thank you for your question about usage of GPU. We have a subsidiary called Intuit, and they are working on Sarashina, and they are working on that and upgrading Sarashina. And based on Sarashina, we have built Sarashina mini, which is 70 billion parameters, and we plan to launch Sarashina mini sometime autumn this year. We are currently utilizing the LLM as many as possible to improve and grow the LLM. We cannot sell with free of charge or with a charge. We launched Sarashina mini and the use for that will be the most. So starting from autumn this year, again, our plan is to launch commercial GPU as a service. And talking about the Other segment, we budgeted JPY 10 billion -- sorry, JPY 100 billion for R&D, but we have used only 10% of R&D budget for this year. But again, we are talking about R&D budget. Less use of the budget will be better. And we said that we have a budget, but if you want to use the budget, you need to deliver a final product. So again, budget is there. And we just let the researchers use on condition that they deliver something. And if R&D budget has not been used fully, then we could expect some upside in terms of income. And extra income -- we would like to consider the use of extra income for shareholder returns, for example.
Daisaku Masuno: The next question is about Media & EC business and finance business. And today, LINE Yahoo! share price down by 11%. And in your segment, Media & EC and finance, how do you see those segments?
Junichi Miyakawa: I believe it was 12% or more down, Rakuten share price. And I was a little bit surprised because Rakuten's financial result was not that bad. But finance segment, e-commerce segment losing money, which is not good for us, but we can take it back, and we are confident. Going forward, we will have agentic AI available more, and that could change the positioning of search engine and where people want to post advertisement. And LINE Yahoo!, for example, has been studying a lot, anticipating such transformation. I have heard a lot of ideas from LINE Yahoo!, and I am impressed with their ideas. So I will wait and see how they perform. And if they keep struggling, maybe SoftBank may extend our supporting hands. So parent company, us and subsidiaries like LINE Yahoo! want to work together to bring it forward. Yes, Rakuten share price dropped by 12%. Excluding 1 quarter last year, LINE Yahoo! posted net positive. Yes, definitely effectively net positive. So Rakuten suffered only onetime factor, and they posted a positive result, which is impressive, but I believe that there is still room for opportunity going forward in those areas.
Operator: Next, SMBC Nikko Securities, Kikuchi-san.
Satoru Kikuchi: Two questions. Maybe it's too early to ask, but this fiscal year, as you expect, and if you were to increase pricing, then you will win. And even though there may be some swings in the EC and Media segment, but in the previous earnings results presentation, I also asked about AI, computing infrastructure and so in the next 10 years or 20 years. So that will be your core business base or -- but to do so, money and the resources need to be sufficient. Now in the next 3 fiscal years, I think there is a limit that you can achieve. But towards the next mid- to long-term business plan, so what is your thought on that?
Junichi Miyakawa: It's not going to be an easy win. So we would like to carefully work on further cost reduction as well. And this year's JPY 1 trillion, we are sure to achieve. So in the next fiscal year, so this is my 5th year as CEO. And from the next fiscal year, it will be the second cycle of the mid- to long-term. So I took over from Mr. Miyauchi, and I made the 5- and 10-year plan. And so this fiscal year, I set my goal to complete some targets that I achieved. So that includes for HAPS and other. So I have taken some actions around those targets. But now without AI-related initiatives, we cannot make a thorough business plan for the next mid- and long-term. So regarding AI data centers, our existing data centers, its power is about 50 megawatts. And Sakai as a center, we would like to increase up to 300 megawatts. So we have secured power. But if we do it all at once, it will cost like JPY 1 trillion level. So we would like to see the balance between supply and demand. And the same as we did for the base stations investment, we would like to set small goals towards our final goal. Regarding AI-RAN, we have been developing together with NVIDIA now at Keio University campus. The performance has also been tested. And so we would like to challenge ourselves to become -- want to make -- since we do have Sakai factory, so we would like to also challenge using some equipment and make something, but in what stage. And to do so, we would like to see how it goes and different areas from the telecommunications area. So I expect there will be some figures from the different areas other than telecommunications area. So we would like to challenge to the next phase of the next mid- to long-term business plan. So we believe that we have set some foundation so far.
Satoru Kikuchi: The second question, excuse to ask this again, but price plan. What are you so concerned about, if you could share with us? For example, the Docomo's price hike, Docomo Max, that unique plan was introduced, and KDDI increased pricing. And then they're doing bundles, but bundles is really needed or not. That is a question as well. So each carrier price hike is not straightforward. It's a bit tricky, I think. So when SoftBank was to increase price, how it can be done? You may not be able to share that, but what makes you concerned so much? And what are you really concerned about.
Junichi Miyakawa: I'm a person to answer any questions, but it's very close to our strategy-related matters. Well, one thing I could say here is that whether that can be accepted by consumers -- our customers or not. So I carefully check on the net, but I don't really see any positive feedback. So I don't want to make an industry that customers are to leave. So that's one concern, I would say. The second, to put in one word, Docomo and au are strong competitors, but we cannot forget Rakuten. So 3 carriers, including us, are to go to the same direction. Then Rakuten may just get all good things. So we need to consider that point as well.
Operator: Thank you very much. Next, Tokunaga-san from Daiwa Securities.
Kazuki Tokunaga: I have 2 questions. First, to summarize this quarter, ARPU down, improvement of the gross margin, and you got a lot of Consumer customers. And then you may not need to raise prices. But again, in the Consumer business for the quarter, what's your view in summary? And ARPU, how much decrease of ARPU is acceptable to you?
Junichi Miyakawa: Yes, I agree. Consumer business performed well. Actually, ARPU, consumer ARPU didn't go down. Enterprise went down. So in total, we saw decrease of ARPU. So Consumer grew good and Enterprise did not perform well. So I'm not worried about Consumer business at all.
Kazuki Tokunaga: And second question is about the GPU as a service. Looking at the Sakura Internet financial results, they downgraded the forecast because of decreasing demand. But for SoftBank case, only for the internal use, you need more GPU capacity. So maybe you don't have to worry about the demand when it comes to commercial service. So what will be the prospect customers for the GPU as a service, and also internal uses versus commercial offering, which is higher in priority for the use of GPU capacity.
Junichi Miyakawa: At the moment, we don't really release GPU on its own. Rather, what we do is not lending hardware, but lending GPU as a capacity. So our data center can offer GPU as a capacity, not as hardware. And the next big wave will be Cristal. And Cristal is for Enterprise customers. And Enterprise customers want to put their data in data centers in Japan, not outside Japan. And currently, we are using OpenAI's GPU. OpenAI, obviously, is an American company. And when it comes to commercial offering, however, maybe we should look at Azure -- sorry, enterprises are looking at Azure for better protection of the data. That's an approach that we need to think about. So depending on how Cristal goes, the GPU capacity that we have at the moment is not enough at all. So we will see how the demand of Cristal goes.
Kazuki Tokunaga: So going forward, the biggest demand comes from Cristal?
Junichi Miyakawa: Well, at the moment, Cristal and call center agentic AI for enterprise customers, which is ready for commercial product. So once we see a trend in demand, we may need to raise GPU capacity going forward.
Operator: [Operator Instructions] Today, after a long time, there is this presentation, the one that there is a need for CFO. Well, this concludes Q&A session. We conclude SoftBank Corporation earnings results presentation for the 3 months ended June 30, 2025. Today's presentation will be available on demand on our website later today. Once again, thank you very much for your time today to attend SoftBank Corporation earnings results presentation for 3 months ended June 30, 2025. [Statements in English on this transcript were spoken by an interpreter present on the live call.]