KDDI Aktie

Now we will begin the KDDI Corporation FY '26 March Term Financial Results Briefing. I am Hiraoka from the KDDI's Public Relations Department, and I will serve as today's moderator. Today's briefing is being held both on-site and through multiple online streaming platforms, including YouTube.

Today's financial materials and related documents are available on KDDI website. A total of 8 materials are posted on the web. If you are on the conference room, please check your handout.

Let me introduce today's speakers. President, Representative Director, CEO, Hiromichi Matsuda. Senior Management, Managing Director, Executive Officer, Director, CFO, Executive Director, Corporate Sector; Nanae Saishoji; Managing Executive Officer, Director, CSO and Executive Director, Corporate Strategy Planning Division and Executive Director, Tomohiko Katsuki. Executive Officer, Deputy General Manager, Corporate Sector; and Executive Director, Corporate Management Division, Kenji Aketa. A total of 4 will be the speakers.

Mr. Matsuda, please.

Thank you very much for taking time out of your busy schedules to join us today at KDDI's earnings briefing. I will present our financial performance for the year ending March 2026 and the new medium-term management plan.

First, the financial results for the year ending March 2026. On the financial results for the final year of the previous medium-term management strategy, we achieved growth in both revenue and profit, hitting midterm EPS target through underlying performance driven by business growth. Operating revenue for the year ending March 2026 was JPY 6,071.9 billion, up 4.1 percentage points year-on-year. Our underlying performance in terms of operating income was JPY 1,164.3 billion, up 6 percentage points year-on-year, excluding the external outflow and cost of impairment for the contracts associated with the fictitious circular transactions were explained as part of our Q3 earnings at the end of March.

Likewise, our net income attributed to the owner of the parent was JPY 756.7 billion, an increase of 13.6% year-on-year because the amount of net income required to attain our EPS target, which was set at 1.5x. Our net income, 7.9%, our revenue, 1.1%. And I said, because the amount of net income required to attain our EPS target, which was set at 1.5x the level of March 2019 is JPY 748 billion, we were able to achieve net income well above that.

Next, I will discuss our consolidated operating income and its factors for change. Starting from the left, mobile, the Personal Services segment base rose JPY 31.7 billion year-on-year. Excluding the impact of access charge, the increase was JPY 45 billion, a major growth due to our initiative to create value.

Finance and Energy businesses as well as Lawson's equity method income combined increased JPY 17.4 billion. DX increased by JPY 28.6 billion, growing substantially in the second half. We controlled technology structural reform and impact of prior year's promotional expenses. In total, income grew by JPY 66.4 billion with all the business domains maintaining solid performance.

This slide is on mobile structural transformation we have been focusing on for the past year. Structural transformation to shift towards focus on LTV and creation of value have succeeded, resulting in a strong growth in our mobile revenue. As shown on the left, mobile revenue in the Personal Services segment increased JPY 32.6 billion year-on-year. Excluding the impact of access charge, the increase was JPY 50 billion year-on-year, which was much greater than our initial forecast.

Shown on the right is our value creation ahead of our competitors, which underpinned our success. KDDI was rated #1 in connected experience in terms of telecommunications quality for an unprecedented consecutive 4 years. Furthermore, au Starlink Direct, which is marking its first anniversary, exceeded 4 million connections and the 5G Fast Lane is being used by approximately 2.5 million users on a cumulative basis.

As a result, mobile ARPU was up JPY 100 year-on-year with a stable churn rate. The number of smartphone subscriptions was up 360,000 year-on-year, enabling us to achieve increase in both ARPU and the number of IDs.

Next on financial business and DX, which are our areas of focus by promoting the satellite growth strategy during the prior medium-term management strategy between March '23 and March '26, both financial business and DX achieved CAGR double-digit growth, steadily growing at 30.4% and 11.3%, respectively.

Next, I would like to explain our initiatives to strengthen the group governance system in light of the recent inappropriate incident we experienced. The initiatives at a high level are twofold. One is to develop mechanisms and secondly, to build a mutual trust among the group companies, making both to function effectively and sustainably.

First, in order to create an environment in which fraud is deterred and detected, we have completed a comprehensive review of governance across all the group companies. We are addressing the issues identified in the review so that they are remediated by June.

Next, toward the year-end, we will invigorate actions to enhance the quality and quantity of our communication. Executive level dialogues with group companies have been initiated to establish a relationship on an equal footing with them and to better understand their perspective.

Additionally, to embed KDDI's philosophy as the common language by the end of the first half of this fiscal year. KDDI's top management is scheduled to visit 14 of our strategic subsidiaries in person.

I, myself, have visited BIGLOBE and G-PLAN. 260 employees participated in the meeting I attended there. I had more than 10 instances of interactions with them during the Q&A session, discussing our hopes and expectations for the employees, the future of telecom business, mindset change and so forth with the majority of the views expressed being positive, reminding me the importance of having a dialogue by embracing the genuine opinions of the group company's employees and responding to them sincerely, we hope to enhance their trust in KDDI and improve their psychological safety.

Because there is a possibility that simply trying to strengthen the control processes will only increase the burden and cause fatigue on the part of employees on the ground. We will try to alleviate the burden by leveraging AI and manage it creatively so as to make it positive.

Let me talk about the organizational change we're implementing to make these initiatives more effective. As is on the left-hand side, although we put in place a framework 10 years ago when we had the DMX case to manage the subsidiaries across the group from a unified perspective as reorganization repeatedly ensued to respond to changes in the environment, subsidiary management functions within the corporate department have come to be dispersed.

This time to correct this situation, we installed a division to advance governance in all the companies across the group and to integrate the departments in charge of finance, group governance and risk management. This division will be head by our CFO, Saishoji, who will double head as CFO and Head of Governance Division, enabling centralized management assessment and as a result, effective control of financial and governance risk-related information. This division will also play the role of passing down the lessons learned from the inappropriate incident to the new employees and group companies.

Next, as shown at the bottom, whereas before, only the investment management department was responsible for managing investee companies. We are newly setting up a 1.5 line function to engage in communication with the group companies and coordination with the corporate department. To clarify the rules and to drive change, this reorganization will be made effective on June 1.

Lastly, this is the review of the previous medium-term strategy. As is on the left, on the basis of our underlying performance, we have achieved the goal of increasing our EPS by 1.5x the level of March 2019. On the right described in a summary of each business domain.

With respect to telecom infrastructure, we discontinued 3G ahead of our peers in the industry and shifted our full focus to proactively rolling out 5G. We were able to build a best-in-class network. Other main businesses also made a strong progress, as you can see, in particular, inviting Lawson into our group as a partner brought us valuable customer touch points in the form of close to 15,000 Lawson stores, which serves as a foundation for us to create value.

Generally, despite marked changes in our business environment, including mobile tariff reduction, rising fuel prices and political upheaval in Myanmar, we have realized sustainable growth and established a solid foundation for the next phase of growth. Regarding the telecom failure in 2022 and the recent inappropriate transactions, we will make vigorous company-wide efforts to prevent recurrence and to pass down the lessons so as not to allow the memory of these incidents to fade.

I was tasked to see through the final year of the previous medium-term strategy, aiming to balance offense while running and cementing defense at the same time. But as it turned out, I had to face a lapsing governance as it came to be exposed.

I personally acutely felt that in such instances, 100 minus 1 could be 0, as I often say internally. We will utilize this experience as an opportunity to learn a tough lesson and for the entire group to deepen unity and evolve into a resilient corporate group. Allow me to take this opportunity to ask for your continued support for KDDI going forward.

Next, I will explain our new 3-year medium-term management strategy that we have formulated. We named this strategy Power to Connect 2028 based on the power to connect, which we value most. First, let me explain the overall strategy.

Until now, in line with the each generation of mobile technology, we have refined our role as a social infrastructure provider centered on telecommunications while expanding our business. Since assuming the role of President last year -- last April, excuse me, I have focused first on strengthening our core telecommunication business by redesigning its value through a combination of communication quality, pricing, added value and partnership.

With a proactive first-mover mindset, we have created value ahead of the others and strengthened our business foundation. Today, we stand at the entrance to an AI-native society. And I defined this AI-native society as follows. First, it is a society where AI penetration drives efficiency and sophistication, expanding business growth and value creation. However, AI itself will rapidly become commoditized, making its differentiation increasingly difficult through AI alone. Therefore, the key question is how companies will differentiate themselves once AI becomes commonplace.

In other words, I believe competitive advantage in an AI-native society will depend on how effectively companies build value that is difficult for AI to replace. We believe that refining physical assets that are difficult for AI to replace customer touch points, nationwide infrastructure and human talent will be the winning strategy in the society. To achieve this, we advocate a value creation approach called Fusion, which integrates different domains.

Historically, many services that transformed lifestyle emerged through combinations with fields that were initially underestimated. Our concept of Fusion is based on this same philosophy. At the center is Realtech Fusion, which reconnects the strength of physical world with technology in an increasing digital society. This is most directly linked to our future growth, transforming customer lifestyle and experiences through technology while creating new businesses differentiated by real-world value.

On the left is infrastructure fusion. Servers and IT technologies that are fundamental to network construction and network design increasingly requires AI integration. Thus, telecom infrastructure and the new AI infrastructure will be fused to realize the digital belt concept.

And finally, toward the right, there is human resource fusion. We believe people are our most important assets and talent must continue evolving its skills in line with the times.

We will cultivate the ambidextrous talent that combines existing strengths with new skills. The term fusion is inspired by nuclear fusion, where the greatest challenge in nuclear fusion is maintaining an ultra-high energy state all the time. And within that high energy state, collisions generated explosive energy. Therefore, what matters is not simple combination elements, but building a management foundation capable of sustaining a high energy environment.

Stronger governance is a fundamental prerequisite. And therefore, we will use recent incidents as an opportunity to further reinforce our systems and our nationwide scale and partnership capabilities are also indispensable to drive Fusion forward.

Let me explain each Fusion initiatives. The first is infrastructure fusion, known as the digital built fusion. Infrastructure development takes time. So we are planning toward around 2040 and think about planning and designing with a long-term perspective. Going forward, what will matter is having AI nearby and the degree of that proximity.

In addition to already constructed Sakai, Miyazaki, Tama and Oyama, we are planning that all telecom centers and data centers are connected fully by optical network in new sites such as Kansai and Itami. As the space industry develops, communications between earth and space will become increasingly important. As the first company in Japan to realize space communications, we will roll out our power of connectivity to outer space.

Furthermore, we will strengthen our optical submarine cable infrastructure that supports high capacity and low-latency communications as AI increasingly demands faster responsiveness and real-time processing capabilities. We will leverage Japan's geographic advantage as a direct gateway connecting Asia and the United States while further expanding our submarine cable deployment, operation and maintenance business. The digital belt vision aims to establish a nationwide low-latency network and AI computing infrastructure spanning land, sea and air.

At the same time, by advancing operational efficiency improvements and ensuring the transfer of technical expertise, we will invest a total of JPY 1.2 trillion over the next 3 years and contribute to strengthening Japan's industrial competitiveness. The second fusion is about people, developing talents through skills integration.

In this midterm strategy, we position growth of our group companies as a key driver of execution.

We will establish career path and provide opportunities for experiences and advancement through assignments to group companies, overseas offices and regional sites. We will also strengthening HR and compensation systems to support such approach. For instance, through skilled visualization of network engineering, we confirmed their strong adaptability to advanced technologies.

By enabling employees to acquire new expertise through practical work, we were strengthening their ability to implement solutions in society. In AI fields, engineers will increasingly work on site with customers, rapidly deploying and implement solutions. Therefore, operational capability and communication skills will become essential. Through broader group, including KDDI, Iret and security specialized LA, we aim to cumulative approximately 3,000 AI engineers and 2,000 security engineers to be grown going forward.

In sales as well, we will enhance customer engagement capabilities through nationwide scale -- nationwide sales companies, be it Sonic Falcon for personal sales and be it KDDI Biz Edge for assisting SMEs for DX based on the belief that people are our greatest assets. We are promoting full-time employment and maintaining high sales quality. By combining strong field capabilities with AI-oriented thinking, we aim to become closer to customers and expand our fans in each region.

The third is Realtech Fusion. In an AI-native society, we remain committed to delivering value starting from the customer. We will provide AI workforce capabilities that support corporate growth, including physical AI and physical intelligence. We will also provide AI lifestyle capabilities that transform daily life and experiences through lifestyle intelligence.

By rapidly implementing these solutions in society together with partners, we will continue creating new value for customers. One leading initiative in providing AI workforce capabilities through drone-enabled digital twins of physical worksite. To the right, we are also building environments that recreate our vast customer data within Digital Twin space to simulate customer preferences and responses with high precision.

Few companies possesses this scale of data. We intend to move quickly in leveraging this scale. And through these initiatives, we will continue to evolve the value core to the future society that is difficult for AI to disrupt. And among one important component of that value is our brand. When KDDI was established in 2000, we expressed our determination in shape the future ourselves through the message of designing the future.

And later, through Tomorrow Together, we entered a new phase focused on co-creating the future. At the same time, after the pandemic accelerated the digital transformation, communications become deeply embedded in daily life and our AI emerged -- while AI emerged as a major turning point. In this environment, we reconsidered what our brand value should represent.

And as such a discussion, it means supporting each customer's life and aspirations so they can shine in their own way. And it also means continuing to evolve the power of connect, which we take pride in. We consolidated this promise to customers and our unwavering commitment into a single message. So please kindly watch this video.

[Presentation]

Spark your journey, Spark is Kibana in Japanese, its the very thrill that arises deep within you heart. The moment you encounter something that captivates you. And your journey, it is the replaceable journey to life each and every one of our customers embark upon.

In the phrase designing the future we use the term future. tomorrow together, we use the word tomorrow this time, we have evolved these concepts into the expression journey, which embodies a sense of time. This embodies a strong determination to walk alongside each customer's journey. Their very life itself to ignite the flame of their challenges they are taking on and to be a source of support for them.

To those taking the first step and to diving into the unknown, KDDI will be the power that carries you forward. Spark your journey. With this brand message, we are committed to creating value for the next generation. Please look forward to our future developments.

From this page onward, I will discuss how we're going to implement the Power to Connect 2028. As we mentioned in our Q2 earnings last year, the key themes of our midterm management strategy are sustainable growth and quality improvement. On the left, in addition to maintaining growth in our core businesses led by telecommunications, we will continue to create new businesses.

To that end, we will enhance infrastructure value by building a digital belt, promote growth in each business area through the full utilization of AI, create value through fusion and method of cross-domain integration. These initiatives will be key to establishing our competitive advantage. The other key element, as shown on the right, is return-based capital allocation.

While growth requires not only capital expenditures, but also growth investments, this will make awareness about capital efficiency even more critical. This is a crucial point, so I will explain it in detail later. We aim to enhance corporate value by deepening our strength in sustainable growth and improving quality in an AI-native society. Under the new midterm management strategy to strengthen our commitment to growth, we are newly establishing segments and clarifying their roles.

Our Telecom core segment, which is our core businesses, including telecom and infrastructure, the business growth segment leading growth and personal growth segment. Altogether, there are 3 segments that are set up. Telecom core segment at the bottom will pursue continuous transformation toward achieving stable growth and lean profit structure to create sources of funding growth. The source of funding will be utilized to further rush up the core businesses, but will also be allocated to growth domains to accelerate growth.

Further, a favorable cycle to enhance the engagement of customers in the telecom core segment to create synergies for growth will be built. These are the growth targets for the consolidated company in each segment aimed at achieving sustainable growth. In the new midterm period, we aim for a 5% CAGR in consolidated operating profit, exceeding the figures of the previous midterm management strategy, driven by stable growth in the Telecom core segment and double-digit CAGR growth in both the personal and business growth segments. The 2 growth segments will expand their scale with the goal of accounting for 1/3 of consolidated revenue.

First, the Telecom core segment. We aim to achieve stable growth in operating profit by further accelerating the growth of the mobile business, which shifted to a revenue growth trend during the previous midterm period. We are to move away from competition in promotion to competition in terms of value. The key is to utilize AI to achieve both offense and strengthening marketing and defense in enhancing cost efficiency.

For -- we will further accelerate our efforts to the services we have traditionally offered such as financial services, energy, device repair and warranty and services like Ponta Pass and Lawson as the foundation of our AI-powered life cycle. Furthermore, in the global area, we will leverage the insights gained in Japan to expand our successful models overseas. This initiative aims to create new business models in the personal growth sector.

In the financial sector, we will build a competitive advantage through the fusion of existing financial services where we have pioneers in mobile finance since the early days of smartphones and pioneering with 3 financial services geared toward the area of financial tokenization. As a first step toward this goal, we will establish new company collaboration with partners and begin offering a crypto asset wallet.

In the center, Lawson will leverage its store network to expand sales channels with approximately 15,000 stores nationwide, a powerful customer touch point. Povo Giga charge has been well received by younger generations. They are selling 9x last year's level. And accelerating the expansion of mobile accessories and other products are happening, we will build a model that drives growth for both companies. On the right, we will turn the arrival of the next generation of smartphones into a new opportunity.

In the future, AI agents will be installed in all devices. When that happens, the degree of proximity between AI and devices within the digital belt will become extremely important. I personally believe devices will become even more fascinating. So we will try to leverage them as a huge opportunity.

Business growth will also define 5 areas to drive growth to aim for double-digit CAGR growth. In AI integration to provide integrated solutions encompassing telecommunications, cloud and AI, KDDI Iret was launched. What we used to call IoT in the previous midterm strategy is renamed as connected, and we will aim to achieve 80 million connections.

With smartphones combined, the number will rise to 130 million connections. AI BPO, Altius Link will leverage AI to enhance customer experience and drive business transformation. Data center, as is on the right, we will respond to domestic and international demand for AI and traffic regarding data centers. And as a pioneering provider, we will steadily capitalize on opportunities.

We will apply our expertise in deploying connectivity data centers overseas, built on years of experience to our domestic AI centers. We were able to set up this within a very short period of time as a result of our expertise and experience. And inference design capabilities will also be expanded overseas. To further strengthen our infrastructure foundation, we plan to invest JPY 300 billion over the next 3 years, both domestically and internationally.

On the right, regarding cybersecurity, AI has given attackers a decisive advantage, making it critical to determine how we will respond to this. Another key point is the evaluation system, CSS, both domestically and internationally, client will verify and evaluate security measures of business partners. And in order to respond to this, and capture business opportunities, luck with 700 engineers, KDDI will join forces to advance these initiatives.

I'd also like to touch upon our challenges in creating businesses. Smart drone has become firmly established and is growing steadily and has become the top player in the drone market. When we first launched, we set a goal of JPY 10 billion in sales within 3 years. There's been some delay, but we're expecting to achieve this in year 5. Recently, it's been used for remote control in response to bare sitings, and we expect to realize solutions to social issues within the next year.

And in the center, mobi, an on-demand transportation service with a slogan [ quick rise, ] I took the stage at the launch event and have a personal attachment to this business, but it is now moving forward. We will take over this business in July of this year. And as KDDI, Smart Mobility leverage physical local touch points such as au shops and Lawson stores to provide autonomous driving and mobility services.

On the right, we are promoting exporting experiences, expanding solutions to Japan's challenges overseas and targeting this as a business opportunity. For our first initiative, we plan to launch the Povo success story as a sub-brand of Vietnam's telecommunications carrier, VNPT with a service set to begin within the year.

I will explain the capital allocation necessary to drive our growth. To improve quality, we will maximize operating cash flow. And we will continue to leverage our traditional strength of efficient CapEx by utilizing CapEx to sales and controlling it at 12% or below. And on the left, the basic free cash flow combined with divestments and leverage will be utilized to generate funding.

On the right, we will maintain stable dividend growth as a baseline while actively pursuing growth opportunities. Regarding share buybacks, we will respond flexibly, but we'll always evaluate them by comparing the returns against growth opportunities. And we will execute disciplined capital allocation with a focus on capital efficiency.

In our new medium-term management plan, we are committed to disciplined growth investment and the further refinement of our portfolio management in light of the recent inappropriate incident, we will conduct a thorough review of our investment decision-making process and post-merger integration procedures as well. We will also place greater emphasis on ensuring alignment with our corporate culture and working environment as illustrated at the bottom left section.

On this basis, we will actively consider investing approximately JPY 1 trillion over the next 3 years, primarily in growth-oriented sectors. Regarding post-investment evaluation on the right, whilst we have carried out this work previously, we will update our approach to include subsidiaries and second-tier subsidiaries and continuously verify strategic rationality. And should strategic rationality diminish over time, we will consider divestment or withdrawal as a matter of policy.

Under this policy, we have already proceeded with the sales of Capcom Securities and Lifenet life Insurance as previously announced. We will do this type of exercise going forward as well. We have another announcement to make today. We have decided to commence discussions regarding a stock market listing for au Financial Holdings, which was driven the growth of our financial business.

Our financial business has contributed to the development of mobile finance through the pioneering integration of telecommunications and finance and has been steady expansion in both business scale and performance. Taking into account the further growth of the au Financial Group and the public interest nature of the financial business, we intend to proceed with discussions and preparations with the view to public listing. The listing is subject to approval by the relevant authorities, and we will continue to assess our financial stability and further refine our growth strategy.

KDDI intends to continue providing support as a major shareholder following the public listing and plans to utilize the au brand to expand collaboration with the KDDI Group. We will disclose details regarding the schedule and the future processes as appropriate, taking into account the future developments.

Next, I will explain our dividend policy. In the fiscal year ending in March '26, we have achieved our 24th consecutive year of dividend increases. Under the new midterm management strategy, we will remain committed to stable dividend increases in line with our business growth. We also intend to maintain a consolidated dividend payout ratio above 40% in an adjusted basis. Even when temporary factors occurred, such as provisions related to Myanmar business in FY '24 and the impairment of contract costs related to short-term cancellations last year, we kept the dividend at the level of forecast announced at the beginning of the fiscal year. And by using adjusted profit as the basis, we will further clarify our commitment to stable dividends. We will explain later our thinking behind the FY '27 dividend and the concept of adjusted profit later.

Next, I will discuss strengthening capital-efficient management. In this midterm strategy, we will place strong emphasis on disciplined growth investment. We will strengthen divestment initiatives to generate JPY 1 trillion in investment capacity while enhancing our investment pipeline and ability to identify attractive opportunities. In growth areas, we will pursue growth investment while keeping benchmark companies in mind.

We aim to improve ROE over the medium to long term without allowing it to decline even while making growth investment. We will also use ROIC spread as a formal indicator and work continuously to maintain and improve it. To support this, we have significantly revised management incentives and reflected them in the executive compensation.

By incorporating ROE, ROIC spread and the TSR relative to benchmarks, we aim to become a company that takes responsibility for delivering on its commitments. We plan to establish an IR Day from this fiscal year and report on these policies and progress there.

Let me summarize the midterm financial targets that I have discussed so far. On the left side shows the results of the previous midterm strategy. And under the new strategy, we will further enhance these strengths and achievements.

In Telecom core, we will maintain stable growth, while in 5 areas of personal growth and business growth, we aim to achieve double-digit growth and targeting overall operating income CAGR of 5%. And we will continue controlling capital expenditure levels while pursuing growth investments of around JPY 1 trillion and reviewing our business portfolio. We will aim to maintain and improve ROE and ROIC spread.

For shareholder returns, we will maintain a high payout ratio and stable dividend increases while conducting share buyback flexibly. Through these initiatives, we aim to achieve sustainable growth and further improve quality. Sustainability management serves as axis for implementing everything that I have explained so far.

As shown on the left, we have changed the diagram sustainability management, but the essence remains unchanged. We will continue to focus on the 6 material issues shown on right and aim to create a virtuous cycle of corporate value enhancement through their resolution. I would also like to introduce KDDI's management framework. We position Fusion as our growth structure in an AI-native society, and we'll use it to open the path forward to sustainable growth.

I will now explain the consolidated financial forecast for the first year of new midterm strategy ending in March 2027. I will first explain approach to adjusted profit. With IFRS 10 generally applicable from next fiscal year, we will proactively introduce and disclose adjusted profit as management-defined performance measures to visualize growth potential and maintain or improve capital efficiency.

When excluding nonrecurring expenses, we will confirm the approach with our auditor firm and in advance and apply it in discipline. And based on this premise, we forecast revenue of JPY 6.41 trillion, up 5.6% year-on-year. We aim for adjusted operating income of JPY 1.21 trillion, up 5% year-on-year. We aim for adjusted net income of JPY 731 billion, up 2.7% year-on-year. Net income growth appears somewhat lower due in part to the impact of the defense tax increases.

Regarding the shareholder returns, DPS for March '27 will be JPY 84, up JPY 4.0 or 5.0% year-on-year. This demonstrates our commitment and confidence in stable dividend increases aligned with our business growth. And we will conduct share buyback up to a total of JPY 300 billion, including a tender offer for share repurchases of up to JPY 250 billion. We have also resolved to cancel treasury shares exceeding 5% of total issued shares.

We will steadily execute both business growth and capital allocation. These are the key points of consolidated operating income for March '27. On the left, Telecom core mobile expected to continue growing significantly, contributing an increase of JPY 37.5 billion year-on-year, including the negative impact of JPY 9 billion from depreciation and other factors, Telecom core as a whole expected to increase JPY 28.5 billion increasing year-on-year -- excuse me, JPY 28.5 billion year-on-year.

Personal growth is expected to increase JPY 22.6 billion. Business growth is expected to increase JPY 14.1 billion and other factors include impact of lower Rakuten roaming revenue. Overall, we aim an increase of JPY 58.2 billion or 5% year-on-year. Finally, let me summarize midterm management strategy. This point I have explained so far as summarized here.

And we hope that you look forward to KDDI as it enters a new phase of growth. Thank you very much for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you very much for waiting. Thank you very much for gathering. Now we are starting the briefing by Special Investigation Committee on the findings of investigation. I'll be serving as the moderator. I am [ Ikuko Hongou ] from Public Relations of KDDI.

This briefing session is streamed to multiple channels such as YouTube in addition to the venue. Also, the briefing materials have been uploaded on to KDDI's website. And those who are attending in the venue, please refer to the materials in front of you.

In the briefing session, Firstly, we will start with the findings on this matter, to be explained by the Special Investigation Committee, which is going to be followed by Mr. Matsuda from KDDI's explanation on future initiatives in the wake of the findings. Then we will take your questions.

Now without any further ado, let us move on to findings by the Special Investigation Committee.

Let me introduce the committee members. Chair of the Special Investigation Committee, Attorney at Law, Mr. Toshiya Natori; Member of the Special Investigation Committee, Attorney at Law, Mr. Tomohiro Hen; The member of the Special Investigation Committee CPA, Mr. Yasunori Sato.

Now I'm passing the microphone to the Special Investigation Committee.

Thank you for the introduction. As been introduced, my name is Natori, Chairperson of the Special Investigation Committee. I would like to report on the investigation results of the Special Investigation Committee at this moment.

First, the outline of the investigation. The Special Investigation Committee on January 14 2026, was assigned by KDDI to investigate the circular transactions lacking substance at BIGLOBE and G-PLAN. We're going to refer to it from this onward as fictitious circular transactions.

There are five purposes to the investigation: First, conduct a fact-finding investigation into the fictitious circular transactions; secondly, to examine whether there was any impact by the fictitious circular transactions on the consolidated financial statements of KDDI and if so, the amount of impact; number three, identify whether there were any incidents similar to these transactions, similar cases; number four, analyze the root causes for the occurrence of fictitious circular transactions and recommend recurrence prevention measures; number five, others deemed necessary by the committee.

The composition of the committee is such that I, Natori serve as Chairperson; and Attorney at Law, Hen at Nagashima Ohno & Tsunematsu; as well as Sato, a certified public accountant from Deloitte Tohmats LLC. So there are three of us on the committee.

Now as to the method of investigation, from January 14, 2026 to March 31, 2026, the committee conducted an investigation into fictitious circular transactions and similar cases. As to the method of investigation, there are three major aspects to it: One, review of relevant documents; number two, conducting digital forensic investigation, including approximately 3.37 million electronic records that we collected, including e-mails and chats. And of that, we reviewed 123,485 electronic records; number three, interviews with 80 relevant persons totaling 98 interviews.

And with respect to investigation into similar cases, for KDDI and all of its consolidated subsidiaries as of December 2025, we conducted investigation into similar cases at these entities. We conducted written surveys to 778 executives and employees of BIGLOBE and G-PLAN. 738 individuals responded to the survey.

Now let me explain the limitations of the investigation. This investigation was conducted on a voluntary basis and was limited to the extent of the voluntary cooperation obtained from the parties involved.

Since BIGLOBE and G-PLAN did not retain materials or documents regarding parties other than their direct business partners and dealt with a large number of advertisers and advertisement placement agencies, the actual circumstances relating to all advertisement placements have not been verified. Instead, the verification has been limited to confirming the existence of any evidence indicating the authenticity of certain randomly selected transactions.

Next, factual findings and overview of the fictitious circular transactions. First, factual findings of the investigation. There are four major points that I would like to explain as part of the outline of factual findings.

Now as to the period when these transactions took place, it was found that during the period from August 2018. At the latest to December 2025, fictitious circular transaction had been carried out. And this was done under the leadership of Person A, concurrently seconded to BIGLOBE since January 2026, while remaining employed at G-PLAN and with the cooperation of Person B.

Secondly, approximately 99.7% of the sales of advertising agency business of G-PLAN and BIGLOBE was recorded through fictitious circular transactions. And no similar cases have been identified with respect to the consolidated subsidiaries. It was confirmed that the fictitious circular transactions did not involve any organized scheme by G-PLAN, BIGLOBE and KDDI.

Next, overview of the fictitious circular transactions. The advertising agency business involved in the fictitious circular transactions is a business in which G-PLAN or BIGLOBE intermediated web advertising transactions between upstream advertising agencies as referred to as upstream agencies and downstream advertising agencies referred to as downstream agencies and received commission revenue based on the number of successful transactions.

Circular transactions in which they made it appear as though they received and accepted advertisement placement orders from advertisers. The orders did not actually exist. Sububconracted those orders and made payments to the downstream agencies. The legitimate advertisement placement business should have actual orders, but that was not the case. The fictitious circular transactions were conducted.

And as is on the right-hand side diagram, you can see the fund flow is in blue and the G-PLAN and BIGLOBE in between upstream and downstream agencies. Fictitious circular transactions were conducted with 21 of the total 218 business partners of BIGLOBE and G-PLAN in the advertising agency business.

Next, about the background of the fictitious circular transactions. First, as I said at the beginning, in February 2018, under the leadership of Person A, agency business was started, and the business incurred a loss on the order of several hundred thousand yen and failure to meet the sales target.

And driven by unease of Person A, in order to meet the target and cover the loss engaging advertising agency business and conceived the idea of recording fictitious sales to cover the loss and achieve the sales target, Person A initiated these fictitious circular transactions from August 28 at the latest in order to increase the staffing for the business, Person B jointed G-PLAN.

And in order to expand the advertising agency business by leveraging BIGLOBE's financial resources and creditworthiness, in around December 2022, BIGLOBE entered the commercial flows of the advertising agency business and also utilized KDDI's group finance. The fictitious circular transactions were initiated BIGLOBE by substantial involvement of Person A and B.

Person A and Person B, while remaining employees of G-PLAN, were also concurrently seconded to BIGLOBE. In around February 2025, Chairman, then President, and Representative Director of KDDI, he's now the Chairman and then President and Representative Director of KDDI; expressed concerns during KDDI's management strategy meeting about potential compliance risk with respect to BIGLOBE's advertising agency business.

Subsequently, the statutory auditors consulted with the internal audit division and accounting auditors and in collaboration with them, continue their preliminary investigation in preparation for the subsidiary audit of BIGLOBE to be implemented by the auditors in the fall of the same year.

The accounting auditors pointed out the possibility of fictitious circular transactions. And internal investigation team led by KDDI's auditors was formed as a result. In response to the internal investigation, Person A colluded with certain advertising agencies to avoid detection.

Following that, KDDI instructed BIGLOBE to reduce the transaction amounts of its advertising agency business. And in December 2025, following delays in payments from the upstream agency, Person A acknowledged the existence of fictitious circular transactions.

Now this is a scheme of the fictitious circular transactions. This used differences in payment terms for transaction continuity. We have payments for transactions closed at the end of April and payments for transactions closed at the end of May. Two different flows are shown here. But this has been an ongoing matter, April, May, June, July. So this has been ongoing. And through this transaction continuity, circulation of funds continued.

In the diagram, in boxes, you see numbers indicated. This actually indicates the flow of funds. And this is just an illustration. And besides this, multiple agencies are involved in other types of transactions, but this is to give you an easy-to-understand illustrative example.

So if you look at this diagram from BIGLOBE, you see transaction #1 and funds flowed to the downstream agency. And from this downstream agency, it goes all the way up to an upstream agency dated May 15. This shows the flow of funds from the downstream agency to the upstream agency.

And if you look at the payments for transactions closed at the end of May on the right-hand side, you see transaction #3. Again, this is from BIGLOBE to a downstream agency and then from this downstream agency to an upstream agency.

And for payments of transactions closed at the end of May, the upstream agency received funds. And using this as a source using the funds they received, the upstream agency made transaction # 5 from upstream agency to G-PLAN, shown on the left-hand side, as you see, using the differences in payment terms, funds circulated in these transactions.

And as a result, the amount that has been circulated needed to be sufficient to cover the payments made in the previous payment cycle and also sufficient to cover the fees for relevant agencies involved in the transactions. And therefore, the scale of the amounts involved was structured to grow larger.

So such fictitious circular transactions have been ongoing. And the reasons for why such transactions had been ongoing without any detection, Person A and Person B have taken a variety of measures to avoid detection.

First, related to measures taken when initiating or executing transactions, Person A ensured that as much as possible, the downstream agencies and the upstream agencies did not come into contact in a manner that did not involve G-PLAN or Person A or Person B. If the agencies, both downstream and upstream, would come into contact, it would be known that the funds have been circulating. Therefore, in order to avoid such from being detected, Person A and Person B took these measures.

And also contracts and invoices with each agency were prepared to create the appearance of legitimate transactions with evidence of such contracts and invoices. Furthermore, products with high unit prices were selected. These served as a basis for fee payments. Such products were selected to justify the large transaction amount.

Next, I will talk about responses to officers and employees of G-PLAN and BIGLOBE. Basically, inside the organization, in order to prevent these transactions from being detected, such responses were taken internally in the company.

First, Person A and Person B exclusively engaged in communication in respect of the fictitious circular transactions with each advertising agency, preventing other executives and employees from becoming involved.

And secondly, as the amounts of those transactions became larger, there were questions or concerns raised by other officers and employees within G-PLAN and BIGLOBE. In response to those questions or concerns, Person A and Person B provided explanations with supporting reasons to resolve doubts or prevented such questions from arising.

I would like to give one example, preventing the entire business flow from becoming known by providing explanations that the identities of each advertising agency's clients constitute such advertising agencies' proprietary know-how. And if this information were disclosed, direct transactions without going through such advertising agencies would become possible.

Therefore, it was standard industry practice not to verify the upstream and downstream business flow of each advertising agency. Such explanation had been given in order to conceal the entirety of the flow of the transactions.

And also when preparing performance reports, which served as a basis for calculating compensation containing false information, Person A and Person B took measures to make the reports appear realistic.

For instance, rather than showing a simple upward trend in the number of successful transactions, they included periods of decline and provided explanations for why results were not achieved during those periods. So these performance reports were developed or created in such a way that they appeared realistic. So this was another matter that was confirmed.

Next, these are the parties involved in the fictitious circular transactions. An explanation has already been provided, but we have a former employee of G-PLAN, Person A, who concurrently seconded to BIGLOBE since January 2023; and also former employee of G-PLAN, Person B, concurrently seconded to BIGLOBE at the same time. Person A started the advertising agency business in 2015 and led these fictitious circular transactions.

As to the motives, these are the facts confirmed by the Investigation Committee. First, Person A felt a sense of urgency that the performance of the advertising agency business Person A had launched was falling short of initial expectations and that if he was not able to improve revenue and profit, G-PLAN would instruct Person A to withdraw from the business. Under these circumstances, Person A initiated the fictitious circular transactions to cover the losses incurred by the business and to meet sales targets.

However, as the amounts involved became significantly larger, Person A was placed in a situation where Person A was unable to suspend the fictitious circular transaction. Person A stated that Person A did not engage in the fictitious circular transactions for his personal benefit or that of those involved in such transactions.

On the other hand, it was confirmed in the investigation that a representative of an upstream agency had been providing Person with cash payments corresponding to expenses such as meals over the past 2 years. From September 2023 to December 2025, approximately JPY 30 million of payments have been confirmed.

It may be argued that this exchange of money shows the provision of personal benefits in connection with the continuation of the fictitious circular transactions. It is difficult to deny the possibility that the receipt of such benefits was one of the factors in Person A's failure to discontinue the fictitious circular transactions.

Next is Person B. He joined G-PLAN mid-career and was in charge of the advertising agency business and as instructed by Person A, was also involved in the fictitious circular transactions. While it cannot be said that Person B led the fictitious circular transactions, Person B played a significant role as a collaborator contributing to their continuation.

As for the motives, Person B was feeling indebted to person A for giving him the chance to work at G-Plan, which is a workplace that suited Person B's family circumstances. While not fully understanding the overall nature of the fictitious circular transactions, Person B began to get involved in the fictitious circular transactions at Person A's instructions.

As for Person B, no circumstances were confirmed that would suggest the Person B derived personal benefit from the fictitious circular transactions. It has been confirmed that no one other than the two individuals mentioned above, Person A or Person B, was involved in G-PLAN, BIGLOBE or KDDI and that as the investigation committee, this was not an organized incident, as we confirmed.

Next, let me explain accounting impact. As for the impact, as you see in the table for March 2023 and before that and March 2024, March 2025 and the year ending March 2026, Q3 for these periods within KDDI Group; the revenues to be restated and gross profit to be restated are shown in the table.

Also, as for the amounts of external outflow, you see the outflow amounts for each year, which we have confirmed. As for the outflow, other than G-Plan and BIGLOBE in the name of fees, these are the outflow that went to external parties.

Based upon the findings, we have conducted root cause analysis and created recommendations regarding prevention of recurrence. Firstly, for G-Plan and BIGLOBE, as advertise agency business operators, from that perspective, we have conducted root cause analysis and then proposed recurrence prevention measures on that basis.

The details are shown in this slide. But as the root cause for G-Plan and BIGLOBE, what was common in terms of cost was they had a company-wide lack of expertise regarding the advertising agency business and insufficient risk awareness. Also, as the issue related to first line, there was concentration of work to specific personnel and the failure of checks and balances.

Agency -- advertising agency business concentrated on certain individuals. So people other than Person A, Person B, including other people and officers at G-PLAN and BIGLOBE; the people in charge were fixed same concept individuals. So there was concentration of work on certain individuals. And as for the ordering to downstream agency and payment process, authority was not fully divided. And ordering and payment processes were managed by -- single-handedly by Person A and Person B.

And as for issue with second line, there was insufficient management of business divisions. Firstly, there was insufficient credit management. So against upstream streaming -- upstream agency, they were conducting credit management, but it was not sufficient.

Also, it's not really about the credit management, but we came to the relation with downstream agency, large amount advertising posting whether they had the capabilities of taking large-sized order. From that perspective, not sufficient validation was conducted. And more than anything else, there was insufficient verification of existence of transactions.

As I mentioned earlier, regarding the substance of transaction, there were attempts made to verify the existence. But Person A and -- Person A, due to the reason of business practice, the verification involving upstream and downstream agencies were prevented with -- by his explanation, which persuaded others to not pursue further. And as for BIGLOBE regarding group finance, there was insufficient judgment regarding group finance.

As for third line for both entities, internal audit was insufficient. That's the committee's finding. And as for the recommendations regarding prevention of recurrence for G-PLAN, BIGLOBE as the executing entities are based upon the root causes we have identified. We have recommended prevention measures. So company-wide, strengthening of risk assessment for misconduct and risk management systems for new businesses has been proposed.

And as for first line, elimination of opportunities for misconduct by reviewing the structure of business divisions has been recommended. The content is elimination of reliance on specific individuals for tasks and strict separation of responsibilities in the ordering and payment processes.

As for the second line, we recommended strengthening of business security and misconduct detection functions by corporate divisions, such as strengthening of credit management, establishment of strict procedures for verifying eligibility of suppliers and verification of evidence in revenue recognition and payment processes.

In addition, as for BIGLOBE related to group finance, cash flow focus accounting has been recommended by the Special Investigation Committee. As for third line, we have recommended strengthening of internal audit systems and methodologies.

Next, when it comes to issues related to the management of subsidiaries, we have analyzed costs and recommended recurrence prevention measures. As for BIGLOBE, they are business executing company and also they have the responsibility to oversee their subsidiaries. So BIGLOBE appears once again here. As company-wide cause, there was company-wide lack of expertise regarding the advertising agency business and insufficient risk awareness.

Regarding direct management divisions, the challenge was -- is the same for BIGLOBE, as I mentioned earlier. And as for KDDI, there was insufficient risk detection regarding the advertising agency business. And there was insufficient understanding of the division of duties such as ordering and payment. Also, overall, there was insufficient management system for subsidiaries.

As for the challenge regarding the corporate division, as for BIGLOBE, there was insufficient credit management. As for KDDI, there was overreliance on credit limits in group finance management. So the specific -- the loan purpose and the use of funds were not necessarily managed thoroughly. So the credit limits was pretty much the focus of their management.

Also, regarding subsidiaries management, the department in charge of subsidiary management was fragmented and communication among those departments were not sufficient.

As for audit division, for BIGLOBE, it's the same as what I've said. The substance of transaction was not effectively or sufficiently audited. And for KDDI, there was failure to conduct specialized internal audits that address the risk of misconduct in the business of advertising agencies, which we have pointed out. And based on this, in response, we have recommended recurrence prevention measures addressing the root cause, as you see in the table.

From company-wide perspective, strengthening of risk assessment for misconduct and risk management systems for new businesses was proposed. And for KDDI, we recommended the promotion of understanding of business where expertise is limited and strengthening and improving of risk awareness.

As for direct management divisions, especially for KDDI, the content is similar to what I've covered, but we've recommended thorough review of details of business and arrangement of a risk detection system and the strengthening of understanding of internal controls and division of duties and subsidiaries and strengthening of human resources infrastructure for managing investee companies. So by having a solid management system and enforcing it is what we recommended.

As for corporate, for BIGLOBE, we recommended supervision of credit management. And for KDDI, we recommended strengthening of verification of the appropriateness of funding needs in group finance. In other words, not just the credit limit, but the validity of each need for fund should be reviewed. And also, we recommended strengthening of subsidiary management and centralization and integration of financial management functions. So regarding the -- how subsidiaries are managed, we recommend it.

As for audit division, we recommended review of audit methodologies for subsidiaries and enhancement of internal audits in the group. So I have covered the Special Investigation Committee's report or findings.

Finally, our expectations to KDDI from the Investigation Committee. By expressing our expectation, I would like to close my report. The committee strongly expects the management team to take the lead, formulate effective recurrence prevention measures tailored to the management structures of each of the companies of the group and implement them thoroughly.

So with this, I am concluding the report from the Special Investigation Committee. Thank you very much.

Mr. Natori, Mr. Hen and Mr. Sato, thank you very much. You may now step down. This concludes the report on the investigation results. Any questions regarding these findings can be addressed during the Q&A session scheduled shortly. Thank you for your understanding.

Next, we will have a presentation from KDDI Corporation on future initiatives in response to the investigation report. Allow me to introduce the speakers for this part from KDDI Corporation, President, Representative Director, CEO, Hiromichi Matsuda; Senior Managing Executive Officer, Director and CFO, Nanae Saishoji. These are the two presenters. And now President Matsuda will provide an explanation.

My name is Matsuda from KDDI. Thank you very much for taking the time to attend this session despite your busy schedules on the final day of the fiscal year.

You have just heard an explanation from the Special Investigation Committee. To address this matter, we established the Special Investigation Committee on January 14. And over the past 2.5 months, the committee has conducted a thorough investigation with a high degree of expertise and objectivity. I would like to express my sincere gratitude to all the members of the Special Investigation Committee at this moment.

And once again, we sincerely apologize for the considerable inconvenience and concern caused to our customers, business partners, shareholders, employees and many other stakeholders due to the recent inappropriate transactions at our subsidiaries, as was reported earlier.

As was reported earlier, we take extremely seriously the facts revealed by the investigation, specifically the fictitious circular transactions conducted within our advertising agency business, the analysis of the causes leading to this matter and proposed recurrence prevention measures.

We will explain our initiatives aimed at preventing similar misconduct from ever happening again, including recurrence prevention measures and efforts to strengthen the group governance. Since members of the Special Investigation Committee are also present today, we will answer all of your questions thoroughly and sincerely.

This is what we will explain today. First, upon receiving the investigation report today, we will explain the following items related to the matter and its future initiatives, including impact on financial results, personnel measures, recurrence prevention and measures and strengthening governance. Next, we will explain the financial results for the third quarter of fiscal year ending March 2026 and the revisions to the full year financial forecast.

First, our response upon receiving the investigation report. So here's the sequence of events related to this matter. As was reported earlier, it started in February of 2028. In February 2018, G-PLAN's advertising agency business launched by Person A incurred a deficit of several hundred thousand yen. Driven by earns and the urgency to deliver results, the individual began fictitious circular transactions to cover the shortfall at least as early as August of 2018.

In December of 2022, on the back of its financial capacity and creditworthiness, BIGLOBE commenced the commercial transactions in which it was involved, aiming to cultivate new businesses.

Through 2025, as transaction amounts increased, the number of agencies involved in fictitious circular transactions expanded totaling 221 companies to strengthen the management framework for BIGLOBE and G-PLAN's advertising agency business, internal corporate auditors and internal audit department investigated the validity of transactions. And this is as we reported at the earnings briefing on February 6.

But today, we've received and disclosed the investigation report from the Special Investigation Committee. We failed to detect the attempt to conceal the issue. And because it took time to obtain objective evidence, approximately 85% of the total impact has been concentrated in the past few years. We deeply regret this situation.

The financial impact of this matter has been finalized, so I would like to use this slide to explain it. Regarding operating revenue, a cumulative total of JPY 246.1 billion has been reversed for the revenue recorded in connection with fictitious circular transactions. And operating profit below has been reduced by JPY 49.9 billion due to the reversal of posted profits.

In addition, JPY 32.9 billion has been identified as funds flowed out to external parties, and there are no significant changes to these numbers from the announcement made on February. While there were transactions related to our legitimate advertising agency business, their proportion was negligible, only 0.3% of the total. So we have calculated the impact amount based on the full amount of this business.

Furthermore, since the profits and losses for each of the prior fiscal years were revised, we have reconducted impairment tests on the goodwill and identifiable intangible assets recorded at the time of the BIGLOBE acquisition retroactively based on the revised plan.

As a result, over the 3-year period from FY 2023 to FY 2025, we recorded a cumulative impairment loss of JPY 64.6 billion in prior fiscal years. In addition, reflecting the impact of impairment-related amortization expenses as well as impact of taxes and tax effects, the total impact on operating income amounts to a cumulative JPY 150.8 billion, and the impact on net income amounts to cumulative JPY 129 billion.

Next, I will explain the personnel measures we are taking. With regard to BIGLOBE and G-PLAN, key executives and other personnel have resigned effective today, and we are implementing personnel measures for other officers and employees to clarify management responsibility. Additionally, we have dismissed the 2 former employees involved through disciplinary action already.

Regarding executives and other officers at our parent company, KDDI, we will voluntarily return a certain portion of our compensation from the perspective of management responsibility. The main details of these measures are as described above.

From this part, to explain the analysis of the root cause and measures to prevent recurrence, we have summarized where the issues pertaining to this matter exist. On the left is a simplified diagram that describes the relationships among G-PLAN, BIGLOBE, KDDI and agencies.

In the report as well, it was made clear that KDDI did not have direct involvement in the transaction flows, but the slide explains its position with respect to group finance and supervision of its subsidiaries.

On the right is a table that shows the locus of issues in relation to each entity's position. We recognize that G-PLAN has had issues as an executing entity, BIGLOBE as an executing entity and one with supervisory responsibility for its subsidiary, KDDI as an entity with supervisory responsibility for its subsidiaries.

The main issues are as described here. They will be explained with concrete examples later. First, regarding G-PLAN, the issues relate to so-called overreliance on specific individuals for certain tasks where authority was concentrated in the hands of specific individuals. This made it easy, for example, to conceal the circular nature of the business flow.

Furthermore, while large expenditures were regularly subject to Board resolutions, and some executives harbored concerns about the rapid expansion of the advertising agency business, they failed to detect the cleverly crafted reports on false explanations and consequently allow the expansion and continuation of the business.

Additionally, the same individual handled everything from approval requests to ordering and acceptance, and the existence of advertisers and products was not verified. As a result, the separation of duties in the ordering and payment processes was insufficient. To address these issues, we will implement measures to eliminate overreliance on specific individuals such as personnel rotation systems.

On the right are the issues related to business management. Within the corporate division, at G-PLAN, they conduct credit reviews of business partners based on data from [ Teikoku ] Databank and have a system in place to put the brakes on transactions based on payment terms and credit limits. However, we had not anticipated credit exposure on the scales of tens of billions of yen, as seen in this case.

Furthermore, since many upstream agencies lack available data, there were no established rules for screening them. And the screening process was left to the discretion of the responsible staff, resulting in insufficient credit evaluation. So although the system itself existed, it did not reflect actual conditions. Therefore, we will proceed with a review of our management standards for business partners and credit.

Next is BIGLOBE. On the left-hand side, we list insufficient risk awareness in new business initiatives. The advertising agency business was a new domain for the company, and sufficient expertise had not yet been accumulated. Ideally, the company should have conducted detailed verification of deliverables, held top-level meetings with key clients, strengthened the team and reorganized its structure.

However, despite sensing irregularities and due to rebuttles from the employee, it was not able to carry out deeper verification of the actual existence of the business. And also the funds or payments were made in advance following short payment terms.

As the business expanded, it became an issue that the business assessments were overly optimistic regarding differences in payment and collection terms and the deterioration of operating cash flow. As a result, there was insufficient restraint on the rapid expansion of the business. And on the right-hand side, deficiencies in subsidiary management with respect to G-PLAN.

BIGLOBE's credit management standards require confirmation of the end user at the start of a transaction, a proper understanding of the deal details and clarification of contractual relationships along with ongoing updates of credit limits.

However, G-Plan, which also functioned as an upstream agency from the eyes of BIGLOBE was treated in a manner equivalent to KDDI and its consolidated subsidiaries. As a result, credit management was not conducted and a full review of the entire transaction flow was not carried out.

In addition, as was mentioned before, internal audits were deemed to have no issues without supporting verifications such as document checks, resulting in an insufficient response. Going forward, we will review counterparty and credit management standards and rebuild the monitoring framework.

And lastly, KDDI. On the left are issues in managing subsidiary operations. In the business plan review for subsidiary management, P&L contribution was prioritized, and we must acknowledge that verification of market size and trends in the advertising agency business, BIGLOBE's market share, counterparties and cash flow was insufficient.

In addition, we tended to accept explanations from BIGLOBE at face value, which we recognize as an issue. Going forward, we will strengthen monthly profitability and cash flow management and increase communication opportunities.

On the right-hand side is group finance management. The group finance scheme contributed to the expansion of the impact of this issue. In principle, subsidiary borrowings are handled through group finance, but management was overly focused on credit limits.

These limits are set based on business plan reviews for the following year and group finance reviews grounded in monthly cash flow plans. However, once they are set, loans were generally extended upon request from subsidiaries as long as limits were not exceeded.

In other words, verification of the appropriateness of lending was insufficient, which contributed to the expansion of this issue. We have already implemented improvement measures to the group finance review process, and we will continue to work to strengthen the financial monitoring process.

Now regarding our initiatives for improvement, the investigation committee has provided recommendations on the identified issues and measures to prevent recurrence. Taking these into account and incorporating the matters we have independently reviewed, the table on the left presents a comprehensive summary of the root cause analysis.

As shown on the right, we will address these issues thoroughly through our recurrence prevention measures. We will carefully review the recommendations and continue refining our preventive measures to make them more effective going forward.

In addition, as shown at the bottom, we believe it is essential to implement a two-layered approach, combining these measures with further initiatives to strengthen our overall framework. To build a more robust governance, we will go beyond formal measures and focus on ensuring real effectiveness while also fostering a corporate culture that supports this and reexamining our approach to group management.

I would like to express my determination to strengthen group management. We take this matter very seriously, recognizing that there were issues to be addressed at each layer of group governance, G-PLAN, BIGLOBE and KDDI.

As the business continues to diversify and expand, we have held ongoing discussions, including with outside directors on how group management should function. We have been advancing initiatives such as developing CFO talent at each company, establishing reporting lines and supporting shared corporate functions such as accounting and payroll.

However, this incident has also revealed shortcomings, particularly in our understanding of new businesses within group companies and in our dialogue on the type of talent required.

This advertising agency business was not a growth driving area for achieving the midterm plan. In other words, in our view, one major factor is that within the parent subsidiary relationship, we were not sufficiently engaged with businesses outside the group's designated strategic growth areas.

Addressing this requires not only formal or structural measures, but also highly practical and effective efforts. In particular, the softer aspects are critical, creating an environment where even minor concerns can be raised without hesitation and to foster a culture that prevents departments from becoming isolated.

For subsidiaries as well, a strong sense that the parent company is closely engaged serves as a major source of motivation for employees on the ground while also functioning as a powerful deterrent against misconduct. That is our conviction. And we believe that the shared foundation enabling such relationships and mutual trust is the KDDI philosophy, which serves as the group's common code of conduct and set of values.

Taking this incident with the utmost seriousness, we will conduct a comprehensive review of governance across the entire group. At the same time, we will use this difficult experience as an opportunity to strengthen unity across the group and evolve into a more resilient and integrated corporate group.

To that end, I will demonstrate leadership and commit myself fully to these efforts. Within our company, we have established a risk management committee under the Board of Directors. In addition, we have newly set up a group governance enhancement measures meeting under it, which I personally lead. We will not only formulate measures to prevent recurrence of this issue, but also ensure there are thorough implementation across the entire group.

Next, I will explain our consolidated results for the fiscal year ending March 2026. First, the official consolidated result for the third quarter of the year ending March 2026. We have made adjustments related to fictitious circular transactions and implemented resulting accounting treatments.

Regarding the changes since the earnings briefing on February 6, there are no particular changes to the performance of our core businesses. These businesses are performing well with increases in both sales and profit.

As for the accounting treatment related to the fictitious circular transactions, which is a point of change, there is an impact of plus JPY 2.6 billion on operating profit and plus JPY 8.6 billion on net income. These respective impacts are due to the cancellation of amortization expenses resulting from the impairment of intangible assets in previous years and the tax impact related to the fictitious circular transactions.

Next, I will explain the revisions to the consolidated result forecast for the year ending March 2026 compared to the initial forecast. There are 2 main reasons. One is the impact of the inappropriate transactions and the other is revision reflecting changes in the mobile competitive environment, which is unrelated to the fictitious circular transactions. On the left, relative to the initial forecast, we have revised revenue downward by JPY 270 billion to JPY 6.06 trillion from JPY 5.8 trillion of last year.

Similarly, operating profit has been revised downward by JPY 88 billion to JPY 1.09 trillion and net income by JPY 50 billion to JPY 698 billion. On the right, regarding the main factors for the profit revision, the first is the impact of the fictitious circular transactions, which includes the JPY 25 billion reversal of recorded profits and JPY 17.1 billion impact from the outflow of funds to external parties. Second, I will explain the second reason, the revision based on changes in the mobile competitive environment. Of the sales commissions incurred at the time of a customer's contract in the personal business, the portion expected to be recovered through future communication service revenue is capitalized as contract costs. But our company has shifted to a sales strategy that emphasizes lifetime value, and we have adopted a policy of not spending excessive promotional expenses on SIM-only subscribers or customers expected to cancel in the short term.

Based on this policy, we will review our accounting treatment starting next year and have decided to exclude from the scope of capitalization, the expenses for which cost recovery is difficult. Based on this, we are implementing an impairment loss on the contract costs capitalized in the past by carving out the portion related to these short-term cancellations. As a result, we will record impairment loss of JPY 50 billion in the fourth quarter of this fiscal year. Please note that even after these adjustments, there is no impact on our cash flow generation capability. I will explain the key points of the revised consolidated results. The fiscal year ending March 2026 is the final year of our current medium-term management strategy and is an extremely important year for us. So we are committed to achieving both an increase in profit and effective realization of our medium-term EPS target.

On the left, even at the revised profit level, we are at a level that achieves a profit increase compared to the previous fiscal year. On the right, we have been pushing forward with our medium-term plan, aiming for an EPS of JPY 194.38, which is 1.5x the level of the year ended March 2019. Although the revised EPS forecast does not reach the target in terms of nominal figures, we believe it is attainable on an underlying basis, excluding one-off factors. I will now explain those one-off factors. The sorry, the JPY 25 billion in reversed profits from the inappropriate transactions is not a onetime factor, but rather a business-related element, which we will recover through our initiatives.

On the other hand, the outflow of funds and the impairment of mobile contract costs are subsequent onetime factors with an impact of about JPY 50 billion on a net income basis. As a result, excluding these onetime factors, we believe we can reach the level of our initial forecast of JPY 748 billion. We appreciate your understanding of these points as a reflection of our strong commitment. Finally, I would like to discuss our future outlook. Accepting the facts uncovered by the Special Investigation Committee, we will strive to restore the trust of all our stakeholders by ensuring that recurrence prevention measures are thoroughly implemented throughout the entire KDDI Group.

Furthermore, we have confirmed that this matter pertains to transactions within the advertising agency business and has no impact on the provision of our telecommunication services, including big law. So please be assured of this point. We will promptly file civil lawsuits for damages against the parties believed to have been involved in the fictitious transactions and we will make efforts to recover the funds that flowed out of the company. Also, we are considering filing criminal charges against the involved parties, and we are already consulting with the police. And this matter does not have impact on our cash flow generation capability or the next medium-term management plan currently under consideration. We will proceed with both our full year results announcement in May and the next medium-term management plan as scheduled and without delay. We will continue to manage our operations toward sustainable growth by strengthening our business foundation to enhance governance alongside driving business expansion.

Finally, regarding the expectations for KDDI, the Investigation Committee stated they expect the management to take the lead and implement effective recurrence prevention measures thoroughly. I promise to respond firmly to this expectation to learn from this difficult experience and by taking the lead myself and putting in the necessary work to evolve ourselves into a more resilient and unified corporate group. That concludes my presentation. Thank you very much for your attention.

President Matsuda, Director Asoshi, please step down. We need to convert the stage. We would like to move on to questions and answers at this moment. In today's meeting, both members of the press and analysts are attending jointly. So we would like to take questions from both groups. Questions will be taken from those of you at the venue and those of Zoom. [Operator Instructions]

Let us begin questions and answers. At this moment, we would like to have [ Matsudashoshi from KBI ] and the Chairperson of Special Investigation Committee, [ Mr. Natty and Mr. Hentoryaw, ] member of the Special Investigation Committee. The 4 people will respond to questions. or [ Black D ], the first row closer to the MC.

My name is Kuroda from Asakihimba. I would like to ask you to confirm the details. Vicious circular transactions started as early as August 2018. And in terms of the revenue that was affected, April 2017, that was the starting point of counting the cumulative revenue. The time points are different. So if you could please explain the reason as to why that is the case.

Thank you. Allow me to answer. As you rightly pointed out, as we calculate the impact on our revenue, as you rightly pointed out, so we have covered all the advertising agency business following the year ending March 2018. As a result of the investigation of those transactions following March 2018, as we described, fictitious circular transactions were the majority. Therefore, legitimate business transactions was very small as a proportion of the total, very negligible. And that is why we have looked at the entire amount of business as being affected. And so that's how we arrived at the amount impacted.

Next, I would like to ask about the future BIGLOBE and GPlan advertising business. What is your plan to deal with that? According to some press reports, you are to withdraw from advertising business in these entities. What's been the progress?

Thank you for your question. So advertising agency business, 99.7% of the business was through fictitious circular transactions, and that was strictly related to advertising agency business. the majority of the business was fictitious circular transactions. So we have no intention of resuming this advertising agency business. But the -- on a cumulative basis, fictitious transactions accounted for 18% of the total revenue of Big Globe. And I gave you numbers with respect to our advertising agency business for the year ending March 2018 and onward and what the cumulative number has been. So the 2 companies with withdraw from advertising agency business going forward. Is that correct? Yes, there was no substance to the business. Therefore, we will withdraw.

If you have a question, please raise your hand. In Block first row closer to the entrance.

I am Kobayashi of Yomiuri Shimpo Newspaper. I have a question to Mr. Natori. Why this conduct, this kind of misconduct went on for a number of years without being detected. That's where I don't understand. KDDI, what do you see as issues in relation to the group governance at KDDI? Why was this misconduct not detected for many years? What do you think are the reasons? And what do you think are the issues contributing to this?

Yes. Thank you for the question. For many years, it is true that this misconduct went on and was continued. And from various perspectives, I think we can talk about the causes of this. One big contributing factor in my view is that, as I explained before, at the group level, there was a very insufficient knowledge of this new business. We believe that this was one of the fundamental causes of this incident. And as a result of that, the various business departments, second line, third line supervision consequently were also insufficient in many ways. Person A and the other put together this scheme for fictitious circular transactions, including the lack of the evidence or the toil. And furthermore, at each company, even there were persons who doubted and who questioned the transactions.

However, looking back in hindsight, explanations given at that time were insufficient, but coupled with the lack of knowledge of this new business, the persons who raised the questions were convinced. So these are multilayered reasons leading to this incident.

I have one more question, and this is for President Matsuda. As for your responsibility as a management, would you comment on that, please?

Yes. Thank you for the question. I briefly touched upon this in the previous slides. But this time, we have the executing entity plan, big globe supervisory responsibility. And of course, KDDI, who is in a position to demonstrate a supervision as an entire group, we do seriously take this responsibility. And the Special Investigation Committee investigation confirmed no involvement of KDDI executives or other employees in this matter. So going forward, to strengthen the group governance, I intend to lead the efforts to further strengthen group governance.

Next person, anyone? Okay, then Block 3, row 3, the person close to the moderator. I'm [ Murai from Diamond. ]

I have 2 questions. First, to Mr. Natori of Special Investigation Committee. Firstly, my -- the confirmation I'd like to make is as follows: the finding, so GPlan and BIGLOBE, most of almost all transactions were considered as fictitious. In other words, the advertisement agency business, excluding 0.3%, 99.9% was fictitious circular transaction. Is it the right understanding? Then if so, what about the deliverables or the the advertisers other than the 0.3% is it the right understanding? There was no substance?

Yes, your understanding is right. So for the 0.3% of total, it's based upon revenue. So for 0.3% portion, there were advertisers and there was legitimate transactions and there were posting agencies and deliverables existing. But for 99.7%, that portion was fictitious. There was no advertisers and there was no posting agencies. And the deliverables advertisement did not exist. Okay. In that case, excluding 0.3% portion for BIGLOBE and, so advertisement agency business in most of that, JPY 240 billion of business, they had no clients and deliverables for multiple years. And such business, how could such business continue for multiple years was the lack of expertise may be the biggest factor, but the difficulty of understanding our affiliate business, that may be the factor.

So what was the reason why this business could continue for such a long time?

So in addition to what I have already said, if I may add, advertisement agency business is set to have handled affiliate advertisements, which in our way is a relatively new format, which is online advertisement. That's one of the factors it appears. Especially there was lack of expertise. So officers from officer's perspective, what was a specific way of distribution of advertisement. So there was a definitive lack of expertise among officers. So that is why they were convinced by the explanation by person A and the case this matter went unnoticed for a long time. Excuse me, Mr. Hen will add to my explanation. If I may add one thing, as you saw in the commercial flow, the advertisement agency business has the core, which is the nondirect interaction with advertisers. And also there -- it didn't involve direct interaction with the media advertising media.

So this business was a brokerage business that resides in between parties in generating revenue. So immediate access to advertisers or the check of advertisement deliverable was not readily made available according to the explanation provided. So the advertisement deliverables should have been checked and advertisers should have been contacted. Based upon this matter, there are such points being raised, and I agree with such perspective as the investigation committee, but it's a difficult point. The person A, person B clearly explained out of the situation. So if I may make confirmation to our committee members.

So there was no substantial advertisers, but there were 21 advertising agencies. Then regarding those 21 agencies, so they did not know about their involvement in the fraud or were they aware of what Person A and person B were doing. So there are some agencies that were involved that were accomplished. So in our investigation regarding individual transactions with each agency, whether they were aware of fictitious circular transactions. That perspective is not necessarily is the purpose of our investigation. So the investigation could not be exhaustive enough. So not necessarily we can tell whether individual firm had the awareness. We cannot say definitively whether they were aware. And majority of agencies say they were not aware. So then it's possible. Some of them were aware.

What I said was not sufficient. So based upon our interviews investigations, all agencies said they were not aware of the fictitious nature.

Thank you. Then President Matsuda, this time, one of the causes was the lack of expertise regarding group companies regarding BIGLOBE in the 2018, or communications. So it was a company acquired in the 2018 -- so including companies acquired, you acquired in the past. So similarly, within the group, regarding companies about which you have a lack of expertise, how many such companies are there? Regarding those companies about which you have lack of expertise, how do you investigate or how should I understand the current situation?

Thank you very much for your question. Regarding BIGLOBE, they have communications and Internet business. And as communication and Internet business operator, we acquired BIGLOBE in the past. And regarding our expertise, expertise and interest level interest are intertwined. Lack of it's not about the matter of expertise, but we need to have interest. So satellite growth strategy is our strategy. So peripheral area such as financial service or retailing of power that's positioned adjacent to the power, we have grown those businesses with high level of interest.

So naturally, when it comes to new businesses, we would like to continue accumulating expertise and generate synergy with communication and grow those peripheral or adjacent businesses. That's what we would like to continue to do. On the other hand, the the lack of interest, I believe, was a major factor from BIGLOBE perspective. For them, communication is the core business and the advertising agency business was a new business for them.

So what kind of business model can they adopt and what kind of financial flow should they have? So regarding those matters, did they have enough interest or questions? How would they grow the revenue? They did not have sufficient level of interest. And from KDDI, BIGLOBE's P&L contribution was growing, but KDDI was -- did not have enough interest on the BIGLOBE's P&L contribution. That was a big factor.

Mr. Hen, if you may.

So would you add to your perspective about the awareness among the agencies? Right. Regarding the awareness among agencies, Mr. Natori explained this. But in our investigation, whether they were aware of the fixeditious nature or if they were involved as companies, there was no agency that admitted. Everyone said they were not aware of the fixeditious nature. And our investigation is a voluntary investigation seeking voluntary cooperation. So we had access to e-mail or social media interactions that we could obtain.

On the other hand, interactions only among agencies, even if we requested submission, there were cases where we did not receive access to everything. So it is not that we looked at everything. In that sense, it was a voluntary investigation, which had limits. So on that basis, regarding awareness of advertisement agencies, we cannot definitively make decisions. So that's our conclusion. And that point is not explicitly stated in our investigation report. But as President Matsuda said, for example, civil litigation or a criminal charge, such process, I believe, will help clarify the facts. That's the view of investigation committee.

Thank you.

Anyone with further questions, please raise your hand.

Block A row closer to the podium.

Yoshio Ando from Daiwa Securities. I would like to ask 2 questions related to numbers. Question number one, Page 18, you made a revision to the forecast. So you have made a downward revision of JPY 88 billion. And net income revision of JPY 50 billion. But on the right-hand side, the numbers are JPY 42 billion, JPY 50 billion impairment. And so what are the relationships among these numbers? If you could please clarify.

I'm sorry, it may have been difficult to understand. These are revised forecasts vis-a-vis the initial forecast that we put out.

So the part that has been going well, the other parts that are not going very well, JPY 17.1 billion, negative JPY 25 billion and JPY 50 billion. If you add them up, JPY 92 billion at the operating level. But there are those businesses that have recovered from the initial forecast. And therefore, the number is JPY 88 billion. So JPY 50 billion downward revision to net income is because of reduced revenue?

Yes. If we could please have a look at the next slide, the breakdown of JPY 50 billion as it's on the right-hand side, JPY 17.1 billion external outflow and impairment cost and therefore, JPY 50 billion.

I have the same question. So JPY 1.90 billion revenue. And I think this reflects one-off costs. Excluding those one-off factors, what is the operating profit that is the basis of your business?

Thank you for the question. For these numbers that we have shown, certainly, there are one-off factors that are reflected.

However, what is our true capability? With respect to net income, on the right-hand side, on Page 19, if you could have a look at the right-hand side of Page 19, EPS target that we initially set, JPY 748 billion of net income, I think we are in a position to achieve this level of number to attain the initial EPS target. So the basis of your performance in terms of operating profit would be JPY 1.14 trillion or something.

Yes, I think your understanding is correct

If you have questions, please raise your hand. row, second row closer to the door, please.

I am Mitsumori from TV Tokyo. I have a question to Mr. Matsuda earlier, the attorneys mentioned the involvement of related parties in these effectitious circular transactions, you will move speedily with civil litigations. The related parties, does this include companies, corporations?

Thank you for the question. This time, as the attorneys have mentioned, in total, 21 agencies and counterparties of course, have been identified. As was mentioned, there was nobody that said they were aware of their involvement in these fictitious transactions. But we expect that a huge number of agencies were involved in this business flow in order to receive fees and maybe some of them were aware of the circular nature of these transactions. This is, of course, started by employees of the company initiating these transactions and KDDI was not able to discover the misconduct, and this is something for us to reflect. But that was -- that is our understanding.

So as for the fact finding, we believe this matter should be resolved in court. So as of today, with respect to advertising agencies, you are not initiating consultations with those agencies for the possibility of recovering the amount that was externally flowed. In that sense, right, we've mentioned the 21 counterparties. And of them, maybe we have not identified any that was aware that they were involved in this fictitious circular transactions. I see.

My question next is to Mr. Natori. Based on your response earlier, agencies were not aware of their involvement in these transactions. But without the help, without the cooperation of the agencies, I wonder if such transactions were able to go on. What is your thought on this? It is true that there is certainly room for such doubts to arise.

However, as I mentioned in my explanation, by person A and other, we have upstream agencies and downstream agencies in between, there were various interactions methods utilized to make sure they were not in direct contact with each other between the upstream and downstream agencies. I don't necessarily know that was a common practice of this business. But between the agencies, as to advertising materials or confirmation with clients that are advertisers were not made as per the practice and also subtracting just the fees. And such transactions that were merely to receive funds were also found to be among the transactions investigated.

So objectively, it may be concluded that they were involved in these circular transactions, fictitious circular transactions, but it will be difficult for the committee to conclude that they were aware of their involvement in the fictitious circular transactions. Of course, depending on the degree of the involvement, there were agencies with a possibility of awareness on their part that they were part of these fictitious circular transactions. And this is also our understanding that we have not been able to make a definitive conclusion on this.

Then Block C, the person in the second row, the person close to the entrance.

Kashima from [indiscernible]. I have a question to Mr. [indiscernible]. So among agencies, so from downstream to upstream, there is flow of funds. Then in the interaction, so downstream and upstream. So this reverse direction, is it possible? So in February, in the briefing, some agencies so that upstream and downstream agencies were the same, but were there such cases? Or is it possible for the downstream agency to become upstream.

As for -- there are many commercial flows in this in some commercial flow from GPlan perspective, the downstream agency, this agency could be an upstream agency in another commercial flow. So upstream and downstream depends on whose perspective. That's the key point. So as mentioned earlier, big globe or from GP perspective, the agencies are either upstream or downstream. So seen from different perspective, upstream can turn into downstream or vice versa. In any case, the agency can become upstream or downstream. That's the reality. So whether it is -- if some agencies were working as both downstream or downstream, it is not like they pretended like they were upstream, even if they are downstream, even in legitimate transactions that could happen, the reversal.

So even if they are not involved in the fictitious transaction. So from GP perspective, agency that's downstream, objectively, the fund flows to upstream, but in explanation by person, that's not the explanation that it's upstream agency, but it's an agency that's further downstream. So that does not create the circularity.

Another question to Mr. Matsuda, the diversification of business and the future growth. So as you start new businesses or acquire new businesses, what kind of points do you consider? And what kind of changes are you going to implement?

Based upon what happened, as mentioned, we are going to have the right level of interest. And all along, we have launched new businesses by defining them as growth areas. So the expertise, as mentioned earlier, we will ensure we have expertise and generate synergy with telecommunications. That is our basic approach. So that's what we are going to continue as we do so. So some remote area of business such as advertising agency business where the level of interest may be low or the business that may be more difficult to understand, we understand we need to enhance our structure.

Those of you with questions, please raise your hand. Block F row 2 close to the entrance.

[indiscernible] To check with KDDI, person A and person B involved in this matter. What are their titles? Were they general managers? What level or title did they have?

Thank you for the question. Person A at GPN was the General Manager of the division and person B was the team leader working under person A, B are male, both are men.

Another question about the motive for person A without being able to recover a business or performance, he thought that he had to withdraw from the business. But -- was there any excessive pressure exerted from KDDI on new businesses such as the one run by Person A?

Thank you for the question. Excessive pressure was not identified by the Special Investigation Committee. Person A actually came up with a plan for the new business for the ad agency business. It was launched, but it ended up incurring hundreds of thousands of yen, and he sort of felt a sense of urgency or unease. And it was not a business area that would lead our management strategy. And so our understanding is that we did not exert any excessive pressure.

Allow us to add on behalf of the Special Investigation Committee. In a case like this, was there any excessive pressure on performing? And was that the cause that led to a misconduct?

Well, those are cases in which the company would set an unreasonable unattainable target. And when the target is not met from the management of the company, there would be a lot of harassment that will be conducted. And the person who's in charge of the business would be pressed. That would be problematic.

But in this particular case, such circumstances were not identified or found. And the sales target that was the starting point was one that was attainable, we believe, just because the sales target was not met, would there be any harassment in GP?

That was not the case. Harassment did not take place. So it was unease and a sense of urgency on the part of Pon A that caused all of this. That was our understanding of the cause.

Please raise your hand if you have questions. Block a fifth row closer to the moderator.

I am Kikuchi from SMBC Nikko Securities. Since I'm an analyst, so shareholders and investors from the perspective of whether they are able to hold the company's stock with sense of ease, these are my questions. The first, you've made significant changes to the past years and starting from 2017. So for -- on the securities reports, will you be able to publish the securities report without any issue? Of course, in the Special Investigation committee, the audit companies in charge of by the company were not involved in the committee investigation. But what kind of communication has taken place with them? How are they involved?

Regarding this matter, as for securities report, of course, there are important matters to be considered, but we are making preparations to make sure that the report will be published. For the auditing firm, will you continue with the same audit firm? And you've already had sufficient communication with the audit firm? We've made disclosures, timely disclosures for the past years, and the audit firm has been overseeing those as well. And Tan has in effect have been audited by the audit firm?

I would like to respond to your question. For the revisions to the prior years, the financial results report and securities report have already been revised. And as for the revisions, sufficiently, the audit firm has scrutinized the revisions and gave approval that these revisions present no issues. I see.

The second question is this. As was briefly discussed earlier, JPY 50 billion is the contract sorry, the impairment loss amount, you started from first half of last year and this term as well, you've made some impairment losses as well. Compared to JPY 30 billion that we've seen in the past, is of a different nature. But if we combine, I wouldn't say the amount would reach JPY 100 billion, but at least the amount would be JPY 70 billion or JPY 80 billion in total if we combine. So including DOCOMO and SoftBank, they are all making these impairment losses. But compared to these companies, your company's amount appears to be larger.

Of course, there isn't a true comparison to be made with the other companies, but maybe some special circumstances contributed to this amount. And also from next fiscal year and beyond, will you also have similar accounting treatment?

I will respond to your question. For the past years, what we've implemented was different in nature from what we have been discussing today. What we've implemented in the prior years, the [ Sumaho Tokusudu ] program for the subscribers of this program, since we have seen an increase in the number of subscribers exercising the rights to benefits, and therefore, the residual value costs are also increasing, and that is why we've additionally recorded this amount. And also this time, what we've implemented it relates to the change in how we sell at the company.

And in line with this, the accounting treatment will be changed from next fiscal year. So the contract costs that has been accumulated on the balance sheet will be reduced by taking this treatment. So they are of different nature. If I may add, the residual value sitting for the handheld terminals, as we've been saying, to an extent, we have been able to control this. So the treatment was done for the past years. So this time, this is not so much related to the terminals, but more related to subscribers who canceled their contracts after short term. There were certain costs that were used for promotion of sales, and they will be eliminated from next fiscal year onward.

Block E, first row closer to the moderator.

[indiscernible] I have 2 questions. First question, as President Matsuda answered regarding the strategy of mobile strategy. And this is a question for confirmation. The timing when you changed your policy, the new policy is going to be applied from next fiscal year. But the other day, in February at the briefing session, you did not explain it, if I recall. So regarding the policy change, when and did you make the change? And what was the reason? -- you already answered the reason, but what's the timing for the policy change?

Regarding this matter, our policy shift was something we had been considering. And in the fourth quarter, our accounting treatment will be changed from next year, but what's accumulated all along was slated for impairment in the fourth quarter. So as for the timing, what we have been considering has been announced this timing of restatement.

Another -- the other question about the fixitious circular transaction background, this is a question for confirmation when it was discovered, uncovered, as Mr. Natori said, after February 2025, at the strategy meeting, the current Chairman pointed out what was the trigger. So by looking at the numbers, the suspicion may arise. So is it a quantitative -- qualitative notice on the side of KDDI, is there some kind of criteria and that picked up the sign?

Let me answer. May -- February 2025 at the strategy meeting, then President expressed concern. And what you asked about, the firm, I don't think had criteria, but advertising agency business was growing rapidly. So against the growth rate, then CEO expressed concern. That's my understanding. So if I may add, we have a master plan, which is the annual business plan. And at the beginning of year, we have plan and the progress of plan. So progress was significant based on the growth.

So February timing was the timing for approving next year's plan. And then that point was raised and then the auditors got involved and point was raised.

Please raise your hands if you have questions. Back row 4 closer to the podium, please. In the black soup.

[ Kanko from Nikkei ] My first question is directed to Ms. Soshi. Because of your position, GPlan, BIGLOBE financial statements are being viewed, I'm sure by yourself. Looking at their financial statements and accounts receivable on BIGLOBE and GPlan's financial statements must have been growing very rapidly. And I'm sure that must have made you uneasy or uncomfortable. And looking at the financial statements, did you not ever feel unease. If I may ask you that.

Thank you for your question. On our part, it was possible to confirm. But what we were trying to validate was the overall business of BIGLOBE not necessarily focused on the ad agency business per se. BIGLOBE itself is growing very much? And why was it growing so much? Ad agency business is somewhat different from our conventional business and we should have had a sense of urgency, and we should have dug deeper to try to find what was going on. We were not able to do so, which is a lesson for us. We were watching profit and loss closely, but sub subsidiaries profit and loss. When it comes to subsidiaries profit and loss, we fail to examine them closely. So as part of recurrence preventive measures, profit and loss, balance sheet, cash flow of all the subsidiaries as well as sub subsidiaries on a comprehensive basis. So we're going to take such a measure, and we're starting to discuss how should that be done.

In relation to the March 2023, the year ending that timing, BIGLOBE's current assets stood at JPY 33.9 billion. Next year, it hit JPY 53 billion. And a year later, JPY 119 billion. So current assets were growing very, very rapidly. And that alone looked strange from a lay person's perspective because I now know that there was a problem, perhaps feel so. But frankly, why did not people notice the rapid growth in current assets alone.

Well, thank you for the question. As you rightly pointed out, but as I explained earlier, in actuality and when it comes to the details of each of the entities within the group, we were not able to exercise enough oversight. And so that is a very hard lesson that we are learning.

And secondly, in relation to that, if I may ask Matsuda-san. So BIGLOBE's profitability was growing very dramatically. And that was outside of the core business. It was in the ad agency business that was growing. And that in itself from the parent perspective, what was your understanding. So it was outside of your plan. Nonetheless, it was growing, but that was good. You were warmly watching over that, thinking that it's a good thing. But February 2025, you started to note concerns why did your attitude change? Where was the point of inflection. So as a parent company, supervising or watching over a BIGLOBE, how did that change? How was the perspective changed?

Thank you for your question. As I said earlier, the amount of impact in the last 2 years, 85% of the impact was concentrated in the last 2 years, as we said. So for the past 2 years, the ad agency business was growing very much and February 2025 in our strategy meeting, it was called out. So there are 2 perspectives. One, is the compliance perspective. Does this pose a problem compliance-wise. So statutory auditor, internal audit started to work together to look into it. That was the timing when that happened. And up until that point, certainly, the businesses are growing compared to the initial plan and not that we were warmly watching over them, but our core telecom business and the new business, if the 2 can be linked together and if the new business is growing, we will be able to increase our core business, and we were able to renovate our telecom systems as a result of the growing new business. That was our awareness.

If you;ve a question, please raise your hand. Block E, first row. closer to the entrance, please.

I am Ishikawa, freelance reporter. My question is to Mr. Natori. For a company as big as BIGLOBE, several tens of billions of dollars being generated in sales by just 2 employees. I think they must be very competent employees. But before this incident came to light, how are they assessed? How are they regarded internally.

As for details of our personnel assessment because of the issues of privacy, I will not divulge. But as was mentioned in your question, in the advertising agency business, they have managed to generate significant profits, and they receive awards. They were recognized internally for their performance.

If you've a question, please raise your hand. Block D, fourth row, the person who is close to the entrance.

[ Horikoshi ] from Nikkei LP. First to Mr. Natori, I have a question. Regarding the motivation -- motive for the fictitious transaction, the person A had needs about failing to deliver target and also outflow related to the meals and also JPY 240 billion and then JPY 30 billion of external outflow, it's a huge amount. And I have a suspicion about the motives. Was there a suspicious point about the JPY 30 billion outflow. So Page 59 also of the PDF file, the agency's commercial flow is shown in the diagram and a payment to company C stands out. And the company C is upstream firm, but it also plays a downstream role as well. And it seems this firm is a key player in the commercial flow. I have not read everything, but see the commercial flow containing SC, Were they just been brought in? So could you explain more about motive?

So what you asked about, firstly, one thing I want to explain is -- so regarding the dining cost, it's not necessarily that us -- it's not positioned as a motive for starting fictitious circular transactions. For a certain while based upon our confirmation after -- a while after the fictitious transaction studied, the dining cost who was being given. So that does not seem to be motive for having studied the fictitious transaction. And the failure to achieve sales target. Also person A launched business initially, dozens of loss was being incurred. And also more than JPY 30 billion of outflow -- external outflow, there is a sense of imbalance, as you pointed out. But as explained, this mechanism with circularity, every circularity, the fee compounds or increases larger. And the size needs to keep growing. Otherwise, the mechanism would have collapsed. So in that sense, as the fictitious transaction grew -- continued, the magnitude grew to this level. And regarding the parties involved, as explained earlier, and as [ Mr. Han ] explained it is not necessarily that we fully understand the awareness of counterparties, it's difficult for us to definitively judge their awareness. But at least, other firms did not invite person A to start such transactions due to person A's motive circular transaction started and some firms got involved -- multiple companies ended up getting involved. That's our understanding.

So if the starting point was unease -- sense of our needs, but after that agencies that got involved in some way, if they get involved. They receive a fee. It appears they have understanding that if they get involved, they can make money. But what is your view?

Yes, your understanding is right. So advertisement, actual advertisements were not created and it was just the circulation of funds by circulating funds, fees was paid. So firms involved ended up receiving fees. That was the nature of the mechanism.

Regarding the motive, if I may add my perspective. As mentioned several times, a loss of JPY 100 -- several hundred thousand and the gap against the final value, there is a gap, but the -- it's a starting initial motive back then. The magnitude was about several million of yen way smaller than the most recent figure. And by repeating transactions, the value about grew bigger and bigger, and it was unthought and as mentioned, internally, the person received the award. And it's a business that he himself started and the business was succeeding. So he couldn't stop the business, that seems to be the motive of him in the latter part of the period. So we should differentiate the motives.

My second question is to President Matsuda. So initial motive was person A's sense of unease. If so, then person A's sense of unease. KDDI has an annual master plan and semiannual modified master plan. And this incident is not linked to the medium-term plan, but as a natural culture, corporate culture, I believe there was atmosphere that the master plan needs to be achieved no matter what. But what was the atmosphere?

In our group, it can be said about the entirety of our group. But since we are an operating company, so we should have an ambitious target toward which we should make efforts. That's a natural course of action. And as Mr. Natori said, unrational goal setting or harassment were mentioned earlier. But in our case, ambitious target set that that's a reasonable thing to the other operating company. Thank you.

Those of you with questions, please raise your hand. Block F, row 3, closer to the moderator's podium.

My name is [indiscernible], a specialized financial services paper. Once again, I would like to go over the impact on your performance. Telecom business, financial business so no change to such businesses and the performance forecast from what you announced in February?

Thank you for your question. Yes, your understanding is correct.

So that's question number one. Another question is as follows. Are -- you will promote measures to strengthen governance. That's part of what you said? And you will follow up on sub subsidiaries in detail going forward. There's a limit to what you can do, I think. For businesses that are not relevant to our telecom business, you said that you will have a good follow-up. But for your businesses that are different from the core business. Perhaps you should not engage in such businesses outside of your telecom business? What do you think?

Thank you for your question. What I earlier said is that the parent and the subsidiary. The relationship between the 2 should be smoother. That was what I meant to say. Well, so far, we have set up new businesses, including financial services business, quite a number of them. And there's a pattern of growth through setting up new businesses. And that is the pattern that we would like to apply to other businesses. You said not relevant to telecom business, but part of our strategy is to increase businesses adjacent to the telecom business, our core business. As we do so, we need to follow up on our subsidiaries. We need to have interest in what they're doing. And that is something that needs to be sustained. Outside directors are sent as directors to subsidiaries and inclusive of such an arrangement, we need to hold interest in the subsidiaries business.

If you have questions, please raise your hand. Block D, fourth row, I believe, closer to the mcee.

I am Yoshikawa, of IT Media News. Regarding person A and collaborator person B, I have questions about these individuals to President Matsuda. Regarding person B, looking at the explanation provided on this person, due to working circumstances, it says that the person be felt indebted to person A for allowing him to join G-PLAN. What's the relationship between the individuals such that certain benefits were provided from person A to person B. What were the circumstances?

Perhaps this should be answered by the Mr. Natori.

Yes, this concerns a fact, so I will take this answer. Person B joining G-PLAN, whether certain benefits, conveniences were afforded. They had known each other since before. Person B was looking for work, and he was introduced to the company.

The second question is also to Mr. Natori. A Person B is a collaborator. What specifically was the work that this person did or played?

A person B was instructed by person A to compile performance reports and the reports were shared with upstream and downstream agencies to realize the circulation of funds.

Block E, third row, the person who is close to the moderator.

[ Figaro ] from Sankei Newspaper. I might have missed, so my question may overlap with what you've said. But person A, person B's motives. My question is to Mr. Natori. So that transaction was continued until the magnitude grew to this size, and there are many things which I am not fully convinced about. So the start was to compensate for the loss, but the transaction was continued for so long. Why? So by incorporating legitimate transactions, the persons did not think about those things? What kind of explanation was provided?

As you say, whether it is person A or well, as Mr. Han said, from the middle of the process, the size of transaction grew too big, so he couldn't put a stop to the transaction. So that's the fact. That's a big factor. But in the lead up to that point, generating profit from legitimate transactions to make a reconciliation, Person A had such intention according to him but such ambition was not realized. So the negative spiral continued and this fictitious circular transactions were continued for a long time. And then agencies who are counterparties, none of them say they were aware of the fictitious transactions. But as long as deliverables were not delivered. It cannot be judged, transactions were conducted in a legitimate way. So just because the performance report was produced even though it's affiliate. So some agencies need to post ads. But while there are agencies who were actually opposing us in the commercial flow specific work did not happen in all agencies ended up being brokers. Somebody asked a question earlier about in this series of transactions, ad deliverables do not exist. So as you asked about, which firm created ad deliverables, no ad deliverable was created and performance report was produced to kind of shape the fictitious transactions. So it's a false report to the effect that deliverables were produced, but there was no substance there.

Then the counterparties, there is no agency that's counterparty that has said they have delivered -- created ad deliverables?

Yes, there is no such firm.

Those of you with questions, please raise your hand. Block D, close to the entrance.

[ Ishinao ], a freelancer. About the involvement of ad agencies, I have further questions. So the fund is circulating in the process. There's this upstream and downstream agencies where the fund would circulate. But initially, you received a fictatious order, and that would involve funds from BIGLOBE and G-PLAN. So in the initial phase, what were the ad agencies? And what was their awareness at the starting point?

In the starting point, not that we have revealed everything that went on in the initial phase. So what we said about the period starting in August of that year. There were no deliverables and it all started with the mobilization of the fund. And the circular transactions. So it got after a start that is the same with all the other transactions that followed.

Understood. My second question. So the current chairman, first aired his concern with respect to compliance. In February 2025. I think it was around the time when it was announced, Mr. Matsuda was to become the President. I think it was right at the time of the handover. And so there was this potential issue of compliance. And at the time, what did you think Mr. Matsuda, that was around the time that you were announced to be the President.

Thank you for your question. I think it was in the mid-February timing. And the statutory audit of KDDI BIGLOBE's auditor in collaboration with them, internal instructions were given to conduct audit on the ad agency business and in collaboration with statutory auditor and internal audit division work went on. And after that, outside accounting auditor was involved and this created an opportunity for accounting auditor to call out. Therefore, in that sequence, investigation was begun and continued. That's my awareness.

So when you became President, did you have this resolved? Are you going to solve this issue, fix this problem?

Well, after becoming President, I took over various issues, and this is one of such issues. And if it was growing very rapidly, I wanted to take over and that contributed to the performance. And there was a negative asset, but we have taken action. So in that regard, I think we have been able to identify the problem properly and have continued the work that was necessary.

If you have questions, please raise your hand, block E row. Closer to the mcee.

I'm Hashimoto of Teikoku Data Bank. I have 2 questions. First, the Special Investigation Committee conducted investigations and the results. On Page 9, accounting impact amount is described, the amounts to be restated for the revenue. Is this the total amount? Or is it only for the fees? Because going back to Page 6, the table listed on Page 6. There are several millions of funds actually moved and fees, several tens of thousands, 150,000. So I think the impact may differ depending on which this constitutes. So that is my question.

My apologies. Regarding your question, are you talking about the PowerPoint slide number?

Yes, that's correct on the PowerPoint.

So as for the impact in terms of accounting, whether this is the total amount or not, I believe, was the question. The answer is yes. This is the total amount. And as for Page 6, this is just an illustrative diagram. So the figures are included to facilitate your understanding. So they are irrespective of actual transactions. This is mainly to show how funds flows, how fees increase in a compounding manner. So this is not directly linked to the accounting impact. I apologize for the lack of explanation on this point.

My second question is related to recurrence prevention. For the cause. One of the causes of this incident was the credit management. For the operating companies going forward, you said that you will review the credit management. Specifically, how will this management be reviewed and revised. And not limited to G-PLAN for other operating companies, will you conduct a similar or the same review of credit management?

Thank you for the question. You are exactly correct. We will target all group companies in reviewing the credit management. Of course, there are credit management specific to individual companies, but we are implementing this review process. G-PLAN and BIGLOBE to an extent, they had a reasonable credit management criteria. However, as I said before, as for the transactions going from -- or loans going from subsidiaries to the sub subsidiary, such reviews were not conducted. So we are conducting company-wide review of the management process.

If you have a question, please raise your hand. Section B, first row at the person close to the moderator.

Yamamoto from Nikkei. I have a question. In February, the press briefing, you mentioned regarding anti-force power. And then you did not explicitly give answer. But were you able to confirm involvement of antisocial group?

First, KDDI's perspective. In our understanding, so there was talk about credit, but antisocial groups check what screening is thoroughly conducted. In addition, multiple data bases are being used in conducting the screening against antisocial force and there was no agency that was identified as antisocial. From the viewpoint of Investigation Committee. As part of credit management, antisocial force screening is conducted and the screening was -- has been conducted. And once again, the company reported that created antisocial force screening was applied. And also the Investigation Committee conducted interviews of stakeholders. And also, we've outperformed digital forensics and checked various data and as part of our review, there was no agency that was perceived or viewed as antisocial group.

Those of you with questions, raise your hand, please. Block E, row 3, closer to the entrance, please.

[ Chayama ] from Toyokeizai. Just to be sure, let me go over the facts once again. 21 agencies who are set to be involved in a fictitious circular transactions and there is an agency that provided JPY 3 million to Person A, and that agency is also saying that they were not aware of the one group doing.

That is correct.

And JPY 33 billion of external outflows, what is the prospect of recovering that?

So for the corporations where external outflows went to your thinking of having civil litigations. And for the 21 agencies, I think it will take time for the conclusion to be arrived.

So what is the prospect of recovering external outflows -- what is your view?

Thank you for the question. As was mentioned, 21 companies, among them, as I said earlier, those who were simply involved in the commercial flow, although there was no substance. And by so doing, they earned commissions. And ad agencies where there are a suspicion that they perhaps were aware of fictitious transactions and we would like to work so that we will be able to see them in our civil litigations. So BIGLOBE management, their awareness of ad agency business, that's what I would like to ask next. So for BIGLOBE, this is a non-core business. So there was a little interest. BIGLOBE in 2022 was involved in the commercial flows and group finance from KDDI also started to be involved. And from there on, the amount increased. So though it was noncore business inclusive of G-PLAN, accounted for 1/3 of the consolidated levels, BIGLOBE management not being involved, it's hard to believe that they were not involved.

So what were the circumstances that led to BIGLOBE's involvement? And what was BIGLOBE's management awareness regarding ad agency business?

So let me report on behalf of the Special Investigation Committee because it's factual. BIGLOBE started to be involved in the ad agency business starting in 2022. And within BIGLOBE, they considered entering a new business. And G-PLAN, its subsidiary was growing ad agency business quite dramatically and BIGLOBE had the credibility as well as financial capability. And so the idea was that by BIGLOBE being involved in the ad agency business that they were able to grow it even further.

But it was not considered as a growth business. Is that correct?

Well, thank you for the question. As we discussed our business plan at BIGLOBE, this business was growing. So they looked at it as a new business that was growing very much. That was their take.

Please raise your hand if you have questions. BLock B, sixth -- row 6.

I am Masuno from Nomura Securities. I have 2 questions. First, on accounting. For short-term churn impairment of JPY 50 billion, I believe, is a significant amount in terms of number of contracts short-term churn, how many millions of or tens of thousands of customers, does it equate? I would like to have a better image of the contracts and how they affect these numbers.

Thank you for the question. As for how many customers are these constitutes, I do not have that exact information with me. But basically, for the short-term churn customers, they are now segmented out. So they will not be capitalized going forward. So that is, I believe your understanding, I do not have information as to how many customers exactly.

The second question is related to these fictitious transactions. 2025 February timing, an alarm was sounded within the company. And perhaps before March, if you had addressed this issue, this could have prevented some amounts that was externally outflowed. So independent auditor or statutory auditors in their audit processes, how were agents audited in their processes. For instance, we have been working on [indiscernible] from 2000. And although they were not affiliates, but you've been involved in the advertising business for a total of 25 years, although they were not affiliates. And I'm sure you are well familiar with the industry and what the major players are saying in the industry. So for the financial results announcement and prior to that, how was this issue dealt with in the audits?

Thank you for the question. Of course, as a group, we have been doing this advertising business. So as you said, we did have opportunities to ask around and inquire about the advertising business within the group. But because this was considered as a BIGLOBE business, so we were delayed in taking action, had we consulted experts then, of course, it was possible that we would have gotten advice that we should have taken a closer look. So that is something we take as part of reflection, that's something that the business we should have done.

If you have a question, please raise your hand. Block E, the person in the second row, closer to the entrance.

Nishida, freelance. I have 2 questions. First, President Matsuda. Future of BIGLOBE. So for advertising business, you are ending it as telecommunication business, which as substance. So do you retain the BIGLOBE as brand and BIGLOBE as entity? Or are you going to -- is it possible that the BIGLOBE will be restructured?

Firstly, regarding BIGLOBE's business, from KDDI's perspective regarding telecom business. They have our full trust and their telecom business is well established, so that should be pursued further. But there was an issue with governance. So starting from first of April, new structure or management structure will be put in place and as External Director, Saishoji will be involved. And also, we will have -- they will have 2 statutory auditors. So what's missing will be enhanced. In other words, BIGLOBE's shape will be changed, but their audit will be strengthened. That's right. That's right understanding.

My second question also is addressed to you. Now in a remote domain, where the level of interest was low. The discovery or discovery did not happen early, but is it possible that a similar thing can happen somewhere else? For example, are there any other domains in your group where the audit needs to be strengthened?

Thank you very much for your question. So this case I can be a starting point for many things. So for the entire group or it is a good starting point for us to give a overhaul of the entire business. But for example, just the enhancing management of group companies is not sufficient. So in that sense, what kind of communication are we going to have from parent to group companies. So that's kind of communication coming from us is important. And also, we are a company that's conducting digital services. So how do we use digital technologies to reduce burden. So that's another thing we should tackle. On top of that, as we continue various businesses, some businesses will be strong, while other businesses will have to adapt to environment. So as I said the other day for earnings briefing. So based upon capital allocation, some businesses might be divested.

Further questions, please raise your hand. Block B, row 4, closer to the entrance, please.

Okada from Nikkei. This overlaps with Nishida-san's question about the future of the group going forward. I have a question. You said that you will look at each individual entity. I think there are 240 or so entities within your group, if I'm not wrong. So is that the right volume, if you are to look at them individually? Or are you going to reorganize some of the entities according to functions? Do you have such a plan or thought? And another question has to do with G-PLAN. The ad agency business appeared large. If you eliminate that, I think your business will shrink. Would you reorganize this one way or the other? So 2 questions.

Your first question -- thank you for the questions. On a consolidated basis, we have 189 consolidated entities. I said individually, of course, naturally, we should have the mindset that we should be looking at them individually. That kind of mindset is necessary, but what I said is that there are business divisions who are responsible for different entities. And BIGLOBE is engaged in telecom business.

Personal business department or division who is responsible for providing oversight. Did they have interest in the ad agency business is the question?

So while diversified autonomously, we would like to provide oversight. So rather than individually looking at them one by one, we need to come up with a mechanism so that we will be able to be effective in exercising governance. And BIGLOBE's ad agency business, the vast majority of that was fictitious. So we're not going to engage in that business any longer. In the existing business, there are business operations that are strongly supported by our customers. What is most critical is not to cause problems or nuisance to our customers. And we will change the makeup of our business and we will consider what the business should be for G-PLAN as well as its organization.

If you have a question, please raise your hand. Block F, I believe fourth row, closer to the moderator.

I am Takagi of Sankei, the newspaper. My first question, I would like to confirm the facts. Of the 218 companies, 21 companies have been confirmed to be involved in these fictitious transactions. And for the advertising agency business, 99.7% have been deemed fictitious. So the remaining 197 companies are responsible for the 0.3% of the business?

Yes, you're correct.

The other question is to Mr. Natori and Mr. Matsuda. For digital advertising per se, is often talked about in relation to fraud and other issues. And this incident at this time for online advertisement, similar fictitious transactions may be easily induced in online advertising business. As President Matsuda, information coming from the Internet space. How do you ensure information coming from this space as well as the soundness of this online media business? You said that you will withdraw from this agency business going forward, but how do you ensure a soundness of this space?

First, I will respond to this question. Of course, the Investigation Committee was not able to investigate the entirety of the Internet advertisement space and also we do not have enough information to determine whether the entire space contributes to fictitious transactions or not. So I will refrain from making any further comment on that.

Thank you for your question. In relation to this incident, we had fictitious circular transactions. And in relation to these transactions, advertising agency business has been highlighted. But regardless of the business, we need to have most discerning eyes. The fact that we were not able to detect such misconduct, the explanation provided by the individual was that this has been a common practice in this business. But to me, such an explanation is an insult to people who are serious and sincere about their business in this industry. So as a group, we needed to do more to verify these transactions.

As for ensuring soundness, this is not limited to the Internet advertisement. For us, we are in the business of providing smartphones and the other products so that customers may feel convenience but perhaps with convenience sense of anxiety or the issues of cybersecurity also come. There are 2 sides of the same coin. So of course, in driving these businesses, we also need to address the negative aspects and perhaps there may be the issue with the soundness of internet advertising and also smartphone addiction. We have been working on research on smartphone addiction. So while we deliver convenience to customers, we also need to properly address the negative aspects of that as well.

If you have question, please raise your hand. Block G, the person in the fifth row close to the entrance.

Free journalists, I am Kato. My first question. Now what triggered the discovery was February 19, 2025, the business was growing rapidly. So concern was expressed about the compliance issue, as you see in Page 64 of the material. And -- but KDDI President -- so there are 30, 20, 30 internal audit members. But Chairman, do they have the high level of compliance knowledge to pick up the sign? Thank you.

Once every 6 months. Our master plan is deliberated on. So business divisions and management engage in an intense discussion at that time. Ad agency business was growing way faster than the telecom business. So the current Chairperson pointed out what he did pointed out. So based upon that, auditors and internal audit dug deeper and 2018 and 2022, audit was conducted on BIGLOBE, but what you said is right.

My second question BIGLOBES auditor, steps down and the G -- and the BIGLOBE has 2 auditors, I believe.

But the standing of permanent auditor is stepping down and G-PLAN is a company with a Board of auditors, but the other auditor, the person is not going to receive disciplinary action or no -- the person is not resigning. The G-PLAN auditor, the same person is auditor of G-PLAN. So the person is resigning.

So G-PLAN plan has 1 auditor or 2. So sorry, BIGLOBE has 2 auditors or 1?

Just 1 statutory auditor. And from first of April, it will have 2 auditors.

Please raise your hand if you have questions. Block D, row 3.

My name is Ota. I would like to ask the substance of criminal litigation that you are considering what charges? And who are the targets? And this might be a different question. Person A, person B, could they be the targets of such litigations?

Thank you for your question. The charges, we are now talking to the metropolitan police, we are consulting with them. At this moment, we cannot say any further than that. Did that answer your question?

Any further questions? Block D, row 2.

Koyama, freelancer. So the person A who started this scheme of fictitious circular transactions. How did he come about with this idea? Was it his own idea or was there someone who was the mastermind or anyone who gave this idea to him?

We were keenly interested in understanding that. So we asked meticulous questions. And the conclusion was that it was a person A who came up with this very idea.

My second question Well, listening to your explanations I think the substance of the transactions was rather sloppy. They could have been revealed quite easily. But if an ordinary company provided oversight to such transactions, perhaps the company could have noticed that they were fictitious. Was that the case? Or was this an anomaly a special case?

So when you say if it's an ordinary company, it's hard to answer that question. In a nutshell, it was quite cleverly crafted. Looking back in hindsight, we could have spotted it easier. If we checked with the advertiser directly, it would have been revealed right away that it was fictitious. And if you checked whether there were actual deliverables ads, then you would have known that these transactions were fictitious. And so in that regard, you could perhaps say that it was sloppy. But as I said in my explanation and gave you an example, internally as well as externally so that it was not revealed by the way person A provided adept explanation, and it was taken at face value, easily trusted. So in that regard, there were issues with respect to control and management. But that is the understanding.

If you have questions, please raise your hand. I will take a question from online participants. Mr. Kenta Yamaguchi.

I'm Yamaguchi, a freelancer. Regarding G-PLAN G Point business. Earlier, Mr. Matsuda said that it is important not in convenience customers. So what will happen to G Point. I think many people are interested in the points. So do I understand correctly that this Point program has nothing to do with the fictitious circular transactions? And is it okay to assume that this Point scheme will be made available going forward?

Yes. Thank you for the question. For the G Point business, this is a completely separate business department from the advertising agents and business that is in question. And the G Point business is being utilized by customers as we speak. So we plan to continue the program.

So maybe we could take one last question, then Block C row 4, the person close to moderator.

Kaneko from Nikkei BP. I have one question to Mr. Matsuda. Slide 14. Regarding philosophy. Mr. Inamori left this philosophy. So 3 philosophy brothers. So philosophy -- to embed philosophy, continuous efforts are being made. That's my understanding. And in this situation, regarding embedding philosophy in the organization was -- if there was anything that's insufficient, what was it? And if philosophy has been fully adopted in the group companies, then what would have happened and how would -- what happened -- have been prevented. So my question is about how the philosophy is positioned?

Thank you for your question. Regarding enhancement of group governance, as mentioned. All along, we have been continuing discussion. And this year as part of philosophy, especially how we make a decision based on what is right and nurturing of sense of ethics that what we have to focus on in embedding into the group companies, but I believe there was a lack of sense of speed.

Philosophy is indispensable as something to come back to as we conduct the business. So principles I laid out the purpose of our business to be clarified, the sense of fair -- spirit of fair play, what does it mean? How should we generate profit?

So the deterrence will be created by philosophy. But the challenge that we identified was we didn't have the atmosphere to help such philosophy take root in the organization. So we have something more to be done. The philosophy training, I believe, is conducted regularly several times here, but the substance is being -- substance has been lost. So Mr. Inamori has already passed away, but it was the background.

And how -- why has it become difficult to help philosophy take root?

The -- that's not the case. For me, that's exactly -- our philosophy is our core competence. So it's being passed down. But the group company and the parent company with our philosophy was embraced as the personal matter, there seems to have been a challenge there.

So with this, we are ending Q&A. And with that, we would like to bring this press conference to close. Thank you very much once again for your attendance.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Let us start the explanation meeting. Thank you very much for joining us today out of your busy schedule. My name is Miyakawa from the Investor Relations Department. I serve as MC today. Very nice to see you.

Today's explanation, as is disclosed, is to present our preliminary results for the third quarter of year ending in March 2026 of KDDI. Today's presentation is being distributed live with Japanese-English simultaneous translation. It is also available on demand on our IR website.

I would like to introduce attendees: Matsuda, President, Representative Director, CEO; Kuwahara, Executive Vice President, Representative Director, Executive Director, Business Solutions Sector; Senior Managing Executive Officer, CFO, Executive Director, Corporate Sector, Saishoji; Senior Managing Executive Officer, Director, Executive Director, Personal Business Sector, Takezawa; Managing Executive Officer, Director, CSO and CDO, Executive Director, Corporate Strategy Division, Katsuki; Executive Officer, Executive Director, Corporate Managing Division, Aketa.

We have also put up 3 pieces of materials of financial results. Regarding the content of the materials of financial results and the contract and other targets we might mention during Q&A session, please refer to disclaimer.

First, President Matsuda is going to explain using presentation materials, followed by Q&A. Mr. Matsuda, please.

Thank you very much for taking the time to join us today despite your busy schedule. I will now explain the results -- preliminary results for the Q3 of fiscal year ending March 2026.

First and foremost, we sincerely apologize for the significant inconvenience and concern caused to our shareholders and investors, including those watching today, due to the suspected improper transactions at our subsidiary. We recognize this matter as a serious incident that could potentially undermine the trust in the entire KDDI Group. As the top management, I feel a profound sense of responsibility for the occurrence of this incident and for failing to prevent it.

I will explain the purpose of today's briefing, the preliminary results explanation. Due to the ongoing investigation by the Special Investigation Committee on improper transactions, the financial impact remains undetermined at this time. Therefore, we have decided to delay the disclosure of the Q3 FY March '26 earnings release.

Accordingly, today's briefing, the explanation session, is titled Q3 Preliminary Results Explanation. We will report on the facts currently recognized by the company, an overview of the financial impact and progress in Q3 business operations unrelated to this matter, along with initiatives for future growth.

Please note that the performance figures, prior year results and financial impact amounts presented today are reference values based on facts currently recognized by the company. Final figures will be reported promptly upon completion of the investigation. At this time, we plan to receive and disclose the investigation report from the Special Investigation Committee by the end of March. In addition to disclosing the Q3 results by the end of March, we currently intend to proceed with the FY March '26 financial results without delay.

These are the key highlights of today's explanation. First, on the inappropriate transactions at our consolidated subsidiaries. This was disclosed on January 14. It has been discovered that improper transactions were conducted by employees of our consolidated subsidiary, BIGLOBE, and its subsidiary, G-PLAN, within their advertising agency business.

Regarding the advertising agency business, the discovery was that sales revenue and other figures may have been overstated. This was triggered by delayed payments from certain agencies in December 2025. A Special Investigation Committee has been established to clarify the facts and causes related to this matter.

Next, an overview of the fictitious transactions identified by our company. So this left side is the expected transaction. The advertising agency and the publishing agencies are located in upstream and downstream. So upstream advertising agencies and downstream publishing agencies are connected by BIGLOBE and G-PLAN as an intermediary. Within this business, we've confirmed suspicions that employees of a subsidiary engaged in fictitious transactions within the advertising agency business, resulting in the recording of fictitious sales revenue and other figures over multiple years.

So this is the originally intended business flow. So the advertising fee comes from the advertiser and commission is deducted and paid to the advertising agency. As you see on the right side, as a result of the internal investigations, it was revealed that the advertiser and the web media do not exist.

So the upstream transaction goes to the downstream. And through the subcontracted party, it was circulated back to the upstream. So this is how the fictitious transaction took place. BIGLOBE, G-PLAN, commissions were deducted. After the circulation back, the upstream advertising agency's payment to BIGLOBE and G-PLAN was halted. This reached tens of billions of yen in monthly transactions in the most recent period.

In this fictitious transaction, as you can see on the right-hand side, in the color of orange, BIGLOBE and G-PLAN had the overstatement of the ad revenue and profit. And in the gray area, the upstream, the agency -- ad agency and the publishing agency, there are externally fluid amounts as well.

As to this fictitious transaction, here we are showing the impact which is recognized by our company at this moment. At the top, reversal of recorded revenue from before FY '24 March, about minus JPY 96 billion; in FY '24 (sic) [ FY '25 ] March, about JPY 82 billion; in FY '26 March, about JPY 68 billion. The total of JPY 246 billion reversal happened.

Below that, operating income. Reversal of recorded income, in the same order: about minus JPY 8 billion; minus JPY 17 billion; minus JPY 25 billion. In addition, we have fees which flowed externally and the provisioning for it. For FY '24 March, about JPY 5 billion; for FY '25 March, about JPY 11 billion; and FY '26 March, about JPY 17 billion. These are the provisioning amounts.

As to these external float amounts, that we will make efforts to recover them. In addition, there's a possibility of recognizing impairment losses, including prior fiscal years.

At the bottom, next steps, as I mentioned earlier, without delay, that we are going to publicize the result of investigation and publicize results-related information. In a parallel way, we are going to review and strengthen the company group's governance and examine recurrence prevention measures.

Here is our commitment to future actions. First, we are fully committed to cooperating with the Special Investigation Committee, diligently uncovering the facts and thoroughly analyzing the causes. I myself will take the lead in actively addressing these issues to restore and strengthen the trust for our Group.

Our company upholds the KDDI philosophy, which embodies the shared values and code of conduct that every individual should uphold. We will create an environment where transparency and fairness underpin our work, ensuring that these principles are communicated throughout the entire Group and practiced consistently. By doing so, we aim to foster a culture that enhances both our human capabilities and ethical standards.

To meet your expectation and to regain your trust, of course, we will do our best to prevent recurrence. At the same time, on top of that, it is indispensable that we develop our business and operating in such a way that we can ensure sustainable growth.

And from here, I'd like to talk about some specific initiatives. So here I would like to talk about consolidated results for the third quarter of FY '26 March as reference figures. Based on the impact amount from the matter recognized at this point, we have revised both the previous year and the current year. And at the bottom, you will see adjusted amounts. On the left-hand side, we have the actual amounts of results after the reversal of the fictitious transactions.

As you can see, on a year-on-year basis, operating revenue, plus 3.8%; operating income, plus 2%; and profit for the period, plus 5.3%. This is year-on-year comparison with the actual numbers on the left-hand side.

Now here, we have the change factors of the cumulative 3-quarter results. And you can see the Mobile, Personal Services segment, plus JPY 27.2 billion; and the Finance Energy Lawson, JPY 80.2 billion.

And next slide shows the third quarter alone consolidated operating income factors for change. And we have settled down the impact of prior year's promotional expenses, as we can see here. First, Mobile revenues bottomed out in FY March '24 and growth accelerated on a 9-month cumulative basis in FY March '26, with an increase of JPY 29.9 billion year-on-year. Structural transformation is also progressing, and we are building a lean and mean operational base with ARPU growth driven by value creation, and churn rate reduction through longer contract duration.

These are the key points of structural transformation of the Mobile business that we explained in our Q2 financial results. We are promoting initiatives to secure long-term contracts by creating value that motivates customers to sign up, shown on the left; and refining au's communication quality and differentiated value services, shown in the center.

This shows creating value that motivates customers to sign up to maximize LTV. Left side, at UQ Mobile, device bundled contracts, which have higher ARPU and contract retention rate, are on the rise, 30% by ARPU and plus 4 percentage points on retention rate. So along with device, we will continue making this proposal. Right side, we are also working to differentiate our plans and services and Money activity plan, Ponta Pass and Netflix are all performing well.

We are enhancing the value of the connected experience, which is the source of our competitiveness. Left side, we aim to expand the 5G SA area to over 90% population coverage by the end of this fiscal year, which will be one of the highest in the industry. Right side, we will cover au Starlink Direct is expanding its connections, compatible models and coverage area.

This shows the result of ARPU growth driven by value creation, which is a factor towards leaner and meaner operational base. Left side, regarding brand migration, UQ Mobile to au migration finally surpassed au to UQ Mobile migrations on a quarterly basis. These factors also contributed to the significant growth of Mobile ARPU by JPY 190 year-on-year, as shown on the right.

The second factor towards leaner and meaner operational base is churn rate reduction due to longer contract trend. au contract retention rate is improving, as you see on the left. And these trends are accumulating and the momentum remains strong, as shown on the right. In particular, the smartphone churn rate in Q3 of FY March '26 fell by 0.01 percentage points year-on-year, showing steady improvement.

We're making progress in addressing the financial business, which was identified as an issue in Q2 financial results. In Q3, credit card business mainly drove profit growth with operating income up by 30.5% year-on-year on a cumulative basis. As shown on the right, the bank's deposit procurement capability, which had been a challenge, has improved steadily and the personal deposit balance expanded by 1.3x year-on-year. The number of Gold Card members also increased steadily by 24.5% year-on-year.

In the Business Services segment, each business area grew. As shown on the left, the growth rate for the third quarter alone was plus 7.7%, a steady increase. In particular, the BPO/SI-related business, which had been identified as an issue in the first half, turned around and achieved increased profits in the third quarter. On the right-hand side, IoT drove growth, increasing about 28% year-on-year. And the number of connections, including SORACOM, performed well, exceeding 66 million.

About Real-Technology initiative, Lawson Town or TV Asahi, through those initiatives, we are expanding it as well.

Now strengthening our management foundation. In light of inappropriate transaction of our subsidiaries, we will be even more conscious of governance and its importance to strengthen our management foundation. As shown in the upper left, KDDI has inherited its principles and systems represented by its philosophy. Furthermore, with the shift to a new management structure, we will further strengthen our core competencies by devising ways to combine this with our aspiration to be a company that inspires passionate challenges.

Next, I will explain our efforts toward growth in the AI era. We will support Japan's digital society, and with both our cultivated communications infrastructure and our new AI infrastructure. As AI becomes more widespread in a variety of settings, the AI infrastructure that can process data securely and with low latency will be important.

Left-hand side, with an eye towards this era, we ensure sovereignty and began operating the Osaka Sakai data center in January as a data hub for securely processing corporate data. Furthermore, next week, in Miyazaki in Kyushu, we are going to start another network center. We will leverage the knowledge gained at Sakai and expand into an AI data center.

In addition to this, as right-hand side shows, we will expand our operations in the Kanto region and utilize our existing landing stations to connect AI data centers with our strong communications network, expanding our initiative to Kyushu Kansai and Kanto area as well.

We call it AI Digital Belt concept, nationwide low latency network and AI computational infrastructure. We will also utilize landing stations and submarine cables across the country to enhance the value of the AI Digital Belt. We will also have more than 60 years of experience when it comes to submarine cable installation. We're still operating with 365-day availability. We possess world-class technological prowess in optical submarine cable connections, which would lead us to more value added. And by leveraging these assets, we will capture data traffic from neighboring countries and create a hub.

Today, at the Board of Directors meeting, we have decided to start integration operating the company. So on top of AI Digital Belt, this new company will operate. It is called KDDI iret. And in fiscal year 2028, we aim at having 3,000, the personnel, including engineers, so that we can convey and deliver the high value-added services to our customers.

Lastly, summary for today. The Special Investigation Committee is conducting its investigation into the suspected inappropriate transactions where the company reviews and strengthens its Group governance and examines recurrence prevention measures. The impact amount is expected to include the reversal of fictitious sales and profits as well as provisions of amounts that flowed outside the company. The company will make every effort to recover the externally flowed portion.

In FY '26 March Q3, core business performed steadily. And we are going to, without delay, publicize the result of the investigation toward the end of March. AI social implementation initiatives, including AI Digital Belt and AI new company and AI development platform are making steady progress.

With the performance of the business, there's no change in the dividend forecast for FY '26 March.

Thank you, Mr. Matsuda. We would now like to entertain your questions. [Operator Instructions]

Mr. Tokunaga from Daiwa Securities.

I'm Tokunaga from Daiwa Securities. Can you hear me?

Yes, we can.

I have 2 questions. First question about inappropriate transactions. Question for clarification. What is the impact of the transaction? What segment will be impacted and what type of revenues will be impacted? Basically, I don't think business will be impacted, but Personal Service segment and [ IO ] or other segment, where will the impact be?

In addition, after Special Investigation Committee's report, after provisioning beyond the next fiscal year, will there be no more impact?

This relates to BIGLOBE. So this is in Communications segment. And this fiscal year -- is there a table on the screen? Fiscal year ending March 2026, JPY 87 billion -- JPY 17 billion is provisioned. After this provisioning, there will not be any impact beyond next fiscal year.

Personal Services segment, other sales, is there going to be impact here, or Communications segment?

Personal Service segment, others. Under others. Yes.

I see. The second question is about medium-term thinking. At the second quarter session, disciplined investment and expansion of business portfolio were discussed, and including M&A, your outlook was to pursue further growth. This time after this incident, will you be more cautious or medium-term plan announcement may be delayed because you are very busy attending to the incident?

As for the suspicious improper transaction incident, we apologize. The Special Investigation Committee's investigation is ongoing, but there will not be a big impact on the cash flow. And we are currently not thinking of changing the medium-term plan. We would like to maintain the policy.

We will take the next question, SMBC Nikko Securities, Kikuchi-san.

Kikuchi speaking. I have 2 questions. First of all, the impact of this transaction. So you mentioned provisioning. So total JPY 33 billion provisioning. Will this be in each term, each year, or will this be posted in bulk, this fiscal year?

So as mentioned in the material, it will be in each year. We will revise each year. In total, JPY 33 billion. So up to Q3, the JPY 17 billion is included, up to Q3.

I understand. So this year is JPY 17 billion according to the current estimate. It's not JPY 33 billion. JPY 33 billion is for each year?

Yes, you're right.

My second question is business segment -- Business Services segment. So you enjoyed profit increase. What was the driver? Which area increased profit? Because I understand that this was falling behind. So how did you catch up? And what will the Q4 projection look like?

And I want this to be one question together: iret, 3,000 people. So will this be increased according to the business scale? Labor costs alone will be over JPY 30 billion, I think, so -- and including fixed cost, it will be sizable. AI sales, can we have that much AI sales? There are not many companies that have that much AI sales. Like NTT said yesterday, there are many things included here. So is this AI-specific company, or including DX and other services for other companies? What kind of company do you want to make this company to try to gather 3,000 employees?

Kuwahara-san will explain.

First of all, Q3, the track record up to Q3, what area is strong? First, for Q3 alone, sales went up by 12.5% and profit 7.7% up. So the base mobile was strong. In addition, IoT and data center, this growth, this area is growing steadily.

In Q2, this was slumping, but BPO, which was weak, and SI -- part of SI, those were slumping. But on profit base, they turned around. This is a big driver. And therefore, Q3 was strong.

And to your second question, iret, KDDI iret. First of all, 3,000 people we're planning for. The feature and how we will increase up to 3,000, first of all, in terms of feature, we can use AI infrastructure. So that is a big strength. It's sovereign cloud, AI. We can use data internally in Japan, and we can manage. So this is a strong feature.

Using that as a basis, we will combine it with communication. Cloud and AI development can be done. So that is a strong feature of this company. Furthermore, in the Group, we have flywheel where data can be generated and make AI-ready. So that is another strength.

Regarding the scale, the headcount is now 1,700. And we have around 100 from KDDI. Sales and SE are transferred or seconded to this company to generate deals. So we have that in place as well.

Now the base sales, what the sales will look like going forward, iret is now working on cloud, so that is one foundation. So using that as a basis, we will develop AI -- accumulate AI development. I hope this answers your question.

Follow-up question. So you have 1,700 now, and you're trying to double the headcount, right? Am I right?

First of all, KDDI Divergence Holdings, that's where iret is belonging to. So under iret, KDDI Divergence Holdings subsidiary will come under iret. And with that, a total of 1,700 people.

Understood. I will try to study more. In your first half, you said the business driver for the profit growth. Price increase is contributing to mobile revenue, increased sales and profit. Am I right?

First of all, the price revision is one factor. But ARPU is already, including value-added ARPU, is rising, and ID, number of ID accounts, is rising as well. So those are big factors.

One additional comment, if I may, regarding iret. AWS and GCP, Google Cloud, there are certified members, around 150 are certified. So along with cloud, we will develop AI. And this is in line with the trend. Amazon, AWS and Google, they are trying to develop AI on the extension of cloud. So for iret, we are trying to do both, have both technology to operate and grow this company.

Masuno-san from Nomura Securities.

Here is Masuno of Nomura Securities. Can you hear me?

Yes, that's good.

I have 2 questions too. First one is about inappropriate transactions. The existing business has been performing very well, I understand. My question is whether this matter is going to negatively impact on the results of next year and beyond. And what about the impact on the business investment? Any negative impact on business investment coming from this matter? That is what I would like to have some clarification. That's my first question.

There will be no material impact on the future creation of cash flow. There's no change in the policies or measures for the next midterm management strategy.

So in May, as planned, you are going to present your new strategy?

Yes.

Second question, iret or other AI-related strategy, AI Digital Belt initiative. About 3 years ago, SoftBank worked on the -- diversified the computation platform. It looks like it is similar to that. And also it is also similar to sovereign cloud. What is the difference with SoftBank? What is the uniqueness of your initiative? What is the benefit?

And sovereign cloud, the [ other meat is ] the budget, LLM, the platform using the digital cloud, more than the JPY 400 billion is earmarked for that purpose. The 10 companies are put together to make a joint venture or the MIC with JPY 150 billion giving financial support to the smartphone link -- Starlink rather. And so what is the difference with the SoftBank's initiative and the satellite, the telecommunication supported by the ministries? How is it different? How is yours different from those initiatives? So in this AI era, how the AI processing should be distributed?

So the mainstream -- as a mainstream, I think we are headed in the same direction. And of course, AI involves lots of electricity. So data center and telecommunication location that should be well deployed, which are to be connected with high-speed connection. I think that's where our strength lies.

When it comes to AI, the latency or response time, that becomes very important. So how to design a nationwide network and how to deliver it to our customers, I think that is where each company needs to think about to show their strength.

As to the government initiatives, we'd like to work on them firmly. We have some lead time for the Starlink and we have accumulated know-how and toward the direction where the government is heading, that we would like to go hand in hand with them.

As to physical AI, the platform, for physical AI platform, what about that side? In this AI era, each company has data and how to make it AI-ready, how to make it possible to process data on AI. And to pursue that path will make you the winner. And so we would like to equip ourselves with capability to make that happen. And in that sense, we would like to participate in the initiative by the government as well.

We would now like to take a question from Henderson Matthew-san from JPMorgan Securities.

I'm Henderson. I have 2 questions. First about iret, also about iret. 1,700 people are already there and you will additionally have 1,300 people. Are you going to hire and add headcount as for these additional resources? Well, existing 1,700, I believe you will be educating and training them, but there will be contribution of revenue from other businesses. As for additional 1,300, I believe that these people may be in R&D for AI. What is the composition of the human resources? What will be the roles played by each respective human resources?

3,000 people include sales and consulting, as noted above the figure. We believe that engineers must be developed towards AI era. Human development, resource development of engineers is important. Network engineer, IT engineer, there are engineers in different fields, including cloud engineers, and they need different skills and capabilities. And they have different skills and capabilities. How do we upskill them for AI era?

In other areas, be it network or IT, we have a number of -- a large number of engineers. So this is reskilling, upskilling, upskilling internally as well. We would also like to consider that.

Second question about Communications business. Just yesterday, NTT announced their earnings results, NTT DOCOMO. Similar to Q2, they commented on increasingly competitive environment. It seems that our competition is increasing. However, it doesn't seem that, in terms of acquisition, they are lagging behind. As for competitive environment, I believe similar question was posed in Q2, do you see any change in the environment? As for acquisition efficiency, how is it trending?

In Q2, we showed illustration, and I've used the same illustration this time. ID acquisition, subscriber ID, we consider this in multifaceted way. One is sales promotion expenses. But we are not solely relying on sales promotion expenses. Area quality, communication quality and services. With added services, we can offer attractive plans to our customers. And that is one competitive edge, one of the competitive edges.

So maintaining sales expenses -- sales promotion expenses at high level is not the only approach, as we have been saying from some time ago. So we would like to refine our services and have customers subscribe to our business, and we would like to retain them over longer term. As for sales promotion expenses, it is flat year-on-year. So we believe that our operation is well balanced.

Next question, Okasan Securities, Okumura-san.

Okumura from Okasan Securities. Can you hear me?

Yes.

I have 2 questions. One is a clarification of the previous question. I'm sorry I'm being repetitive about the fictitious transactions. What is the impact on your next fiscal year? No provision -- no problem with cash flow -- no problem with cash flow. But cost to enhance the internal structure and the negative impact on the non-advertising agency business. So when you build next year's plan, no large concerns for next fiscal year? That's my question first.

So the fictitious transactions happened in the advertising agency business. Our medium-term plan driver is communications and financial and DX and energy. Of course, the internal control and governance need to be enhanced. We will work on that for sure. But it does not impact the financial forecast for next fiscal year and onward that we are trying to build now.

Second question is next year and onward, the shareholder return and buyback. Let me confirm with you again your view, Matsuda-san. So cross-held shares will be sold by a large shareholder again next year. I think this is encouraging for the existing shareholder. But given this incident, you need to grow your profit even further. So rather than excessive buyback, we want you to invest in growth investment. I think that will be better for the corporate value, enterprise value in the long run. So what is your current thinking? I think you will talk about details in the full year results briefing, but anything you could share with us?

We are discussing -- continuing discussing with the large shareholders, and how we address this will be related to the capital allocation policy for the next medium-term plan. So I hope you could wait on the details.

Yoneshima-san of Citigroup.

Here is Yoneshima of Citigroup. I have a question about inappropriate transaction. So towards the end of March, you will have the report on the investigation and then you will publicize it and so on. Probably after the acquisition of BIGLOBE, it is after the acquisition this matter happened, I presume. If that's the case, I might be wrong -- so in addition to GPA, other subsidiaries, other Group companies, those other Group companies will also be subject to the investigation? Is there any possibility of seeing similar thing happening with other Group companies?

So it will be the part of the result at the end of March. And of course, in parallel way with the Investigation Committee, we are checking all the other Group companies to see if there's any similar matter or any examples where the transaction value is growing dramatically with any particular counterparties, for the whole Group level, we have been investigating it. And at this moment, we have not confirmed any other Group company involved.

I feel assured. Another question is about JPY 33 billion, and you said that you are going to make efforts to recover the amount. And as to the external flow, does this mean that the outside company was also involved in this matter knowingly or unknowingly? I think depending on that situation, the possibility of a collection would be very different.

Well, there are multiple number of the agencies, ad agencies. And it seems that some of them have colluded. But this Investigation Committee is doing investigation, including how accurate our internal investigation had been.

[Operator Instructions] No further questions?

It seems that there is no further question. With that, we would like to conclude KDDI Q3 Preliminary Results Explanation session. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Let me start the explanation meeting. My name is Hiraoka from Public Relations Department of KDDI. I serve as MC. Today's meeting, as is disclosed on a timely basis to present preliminary results of the third quarter of the year ending in March 2026 of KDDI. Today's presentation is being distributed on YouTube and other media in addition to the on-site. And we have put up three related materials on the KDDI website. Please refer to the materials at hand. This is the message for the people in the outside audience.

Today's attendees are as follows: Hiromichi Matsuda, President, Representative Director, CEO; Senior Managing Executive Officer, CFO, Executive Director, Corporate Sector, Nanae Saishoji; Managing Executive Officer, Director, CSO and CDO, Executive Director, Corporate Strategy Division, Tomohiko Katsuki; Executive Officer, Executive Director, Corporate Management Division, Corporate Sector, Kenji Aketa. These four are in attendance.

President Matsuda, please.

Thank you very much for gathering here today despite your busy schedules. First and foremost, we sincerely apologize for the significant inconvenience and concern caused to our customers, business partners, shareholders, investors and many other stakeholders, including our employees due to the suspected improper transactions at our subsidiary. We recognize this matter as a serious issue that could potentially undermine the trust in the entire KDDI Group. As the top management, I feel a profound sense of responsibility for the occurrence of this matter and for failing to prevent it. Today, I will carefully explain the details available at this time and sincerely answer your questions. Please be assured that this matter relates solely to transactions within the advertising agency business and has no impact whatsoever on the provision of communication services, including BIGLOBE.

I will explain the purpose of today's preliminary results explanation. As the Special Investigation Committee's inquiry into inappropriate transactions is ongoing, the impact on our financial statements remains undetermined at this time. Therefore, we have decided to postpone the disclosure of our Q3 FY March '26 earnings release. Therefore, today's explanation is titled Q3 Preliminary Results Explanation. We will report on the facts currently recognized by the company, the outline of the financial impact and separate from this matter, the business progress for the third quarter and initiatives for future growth.

Please note that the Q3 preliminary results, prior year results and financial impact figures related to this matter presented today are reference values based on facts currently recognized by the company. These figures may be subject to revision based on the findings of the Special Investigation Committee and the audit results of the accounting auditor. Final figures will be reported promptly upon completion of the investigation. At this time, we plan to receive and disclose the investigation report from the Special Investigation Committee by the end of March. Based on this assumption, we will plan to announce the Q3 results at the end of March, and we currently intend to proceed with FY March '26 financial results announcement without delay.

I will now outline the key points of today's business performance briefing and preliminary results explanation. First, the inappropriate transactions that occurred at our subsidiary, then the growth of our core business foundations, including mobile in our key focus areas and the growth in the AI era.

First, regarding the improper transactions that occurred at our subsidiary. This was disclosed on January 14. It has been discovered that improper transactions were allegedly conducted by employees of BIGLOBE, a consolidated subsidiary of the company and its subsidiary G-PLAN within their advertising agency business. Regarding the advertising agency business, the possibility that sales and other figures had been overstated came to light following delayed payments from certain agencies in December 2025. To clarify the facts and causes related to this matter, we determined it necessary to conduct a more specialized and objective investigation. Accordingly, we established a special investigation committee composed of external attorneys and certified public accountants on January 14.

Next, an overview of the fictitious transactions we have identified. Both -- so this is the left side, which we have anticipated. Usually, from the advertiser, advertiser approaches us. Usually, there is a request to the advertising agency. And the web media becomes multiple. So there is another existence publishing agencies. This BIGLOBE and G-PLAN are in the upstream. Advertising agencies and publishing agencies, they are the intermediary. Around 2017, G-PLAN launched this business and BIGLOBE later entered to develop new ventures. You can see the flow here.

Within this business, the money is also flowing -- subtracting the fees and the advertisement fee is paid. Within this business, we confirmed suspicions that subsidiary employees conducted fictitious transactions for advertising agency services despite the absence of actual advisers -- advertisers, resulting in the recording of fictitious sales revenue and other figures over multiple years.

Now let me use the right side to explain. First of all, the discovery process. The transaction volume increased. So following an internal investigation, KDDI instructed BIGLOBE and G-PLAN to reduce orders to downstream agencies to strengthen management systems and manage business risks. This led to delayed payments from upstream agencies. Within the structure where downstream agencies deducted commissions from payments related to BIGLOBE and G-PLAN's transactions and returned them to upstream agencies, a reduction in payments from both companies decreased the funds flowing to upstream agencies. Therefore, upstream agency became unable to make payments to both companies. So this transaction volume snowballed and reaching hundreds of billions of yen per month in recent periods.

Beyond the publishing agencies, there is #3 and #1, the upstream agencies. We understood that those #1 and #3 are identical. And through this fictitious transaction, BIGLOBE and G-PLAN, posting of revenue was excessive. And because it's fictitious transactions, the fee was flowing outside. And the impact is on next page.

At the top, as of today, these are the impacts that we recognize. As I mentioned earlier, because of fictitious transactions, we need to cancel booked revenue, part of the booked revenue. And this is before FY '24 March, about JPY 96 billion and for FY '25 March, JPY 82 billion; and FY '26 March, JPY 68 billion, the total of JPY 246 billion. Below that, operating income, reversal of recorded income, about JPY 8 billion or JPY 17 billion and about JPY 25 billion. These profits are to be canceled. In addition, as I mentioned earlier, the commissions, which are outflow, and we have provisioning for that, JPY 5 billion, JPY 11 billion and JPY 17 billion. And as to JPY 33 billion approximate number, we are going to make efforts to recover this amount. In addition, including the prior years, there is a possibility of recognizing impairment losses.

At the bottom, next steps. As I mentioned earlier, at the end of March or beyond, we are going to publicize the report of investigation as well as financial results without delay. In addition, in a parallel way, doing and strengthening the company group's governance and examining recurrence prevention measures will be taken.

Now this is our commitment to future actions. First, we are fully committed to cooperating with the Special Investigation Committee, diligently uncovering the facts and thoroughly analyzing the causes. I myself will take the lead in actively addressing these issues to restore and strengthen the trust for our group. Our company opposed the KDDI philosophy, which embodies the shared values and code of conduct that every individual should uphold. We will create an environment where transparency and fairness underpin our work, ensuring that these principles are communicated throughout the entire group and practiced consistently. By doing so, we aim to foster a culture that enhances both human capabilities and ethical standards to meet expectation and to regain trust, of course, we will make efforts to do everything to avoid any reoccurrence of similar matters. At the same time, it is indispensable for us to continue to develop our business for sustainable business operation. So, from now on, I would like to communicate to you specifically what initiatives or measures we will take.

Now this is as reference figures. I present consolidated results for the third quarter FY 2025. And we have revised both prior year and this year because of the impact coming from the matter. Please refer to the bottom column. And we have canceled the revenue and income associated with fictitious transactions. And on the right-hand side, we are showing the numbers as reference values after the provisioning of external outflow. So, in year-on-year comparison with the actual results, the cumulative results for the first three quarters are as follows: operating revenue plus 3.8%; operating income, plus 2% and the profit for the period, plus 5.3%, we are performing well. So that is the cumulative base consolidated results change factors. From the left-hand side, we have the Mobile personal services segment base, plus JPY 27.2 billion and the Finance Energy Lawson, plus JPY 18.2 billion; and DX business services segment, plus JPY 8.5 billion; Technological structure reform, plus JPY 12.9 billion and impact of prior year's promotional expenses, minus JPY 28.9 billion. And based on those numbers, the total of plus JPY 17.4 billion positive. And also the mobile-related revenue grew and it's expanded and the finance and the DX are is moving on smoothly. And this is the Q3 alone consolidated operating income and the factors for change. In addition to each business domain growth, negative impact from prior year's promotional expenses has also subsided. So we are seeing positive growth.

And now I would like to explain about this year's topics. The mobile business is making steady progress in structural transformation. building a stable business foundation that will serve as a pillar for sustainable growth. Mobile revenues bottomed out in FY March '24 and growth accelerated on a nine-month cumulative basis in FY March '26 with an increase of JPY 29.9 billion year-on-year. Right side, we are shifting away from excessive promotional competition and focusing on LTV. Structural transformation is also progressing, and we are building a lean and mean operational base with ARPU growth driven by value creation and churn rate reduction through longer contract duration. These are the key points of structural transformation of the mobile business that we explained in our Q2 financial results.

We are promoting initiatives to secure long-term contracts by creating value that motivates customers to sign up shown on the left. And refining au's communication quality and differentiated value services shown in the center. This shows creating value that motivates customers to sign up to maximize LTV. Left side, at UQ Mobile, we are focusing on promotions that suggest the optimal device to customers and device bundled contracts, which have higher ARPU and contracts retention rate are on the rise by 4 percentage points.

Right side, we are also working to differentiate our plans and services and money activity plan to Ponta pass and Netflix are all performing well, which has increased ninefold. We are enhancing the value of the connected experience, which is the source of our competitiveness. We aim to expand the 5G SA area, which provides more stable communication with stand-alone 5G to over 90% population coverage by the end of the fiscal year, which will be one of the highest in the industry. Right side, au Starlink Direct was launched in April 2025 and has expanded to over 80 devices, 10 million units in less than a year with a number of connections reaching approximately 3.5 million. Recently, there was a report of a fall while ice climbing in Hokkaido and one of them used this service to send SOS, which led to a rescue. Last week, the coverage area doubled, now covering the Ogasawara Islands and all major ferry routes. And in March, the service will be available outside of Japan in the U.S. as well.

This shows the result of ARPU growth driven by value creation, which is a factor towards leaner and meaner operation base. Our value creation efforts have been successful as shown on the left. And regarding brand migration, UQ mobile to au migrations finally surpassed au to UQ mobile migrations on a quarterly basis. These factors also contributed to the significant growth of mobile ARPU by JPY 190 year-on-year, as shown on the right.

The second factor towards leaner and meaner operation base is churn rate reduction due to longer contract trend. Left side, au contract retention rate is improving as customers are finding the value they receive during sign-up attractive. These trends are accumulating and the momentum remains strong, as shown on the right. The smartphone churn rate in Q3 of FY March '26 fell by 0.01 percentage points year-on-year, showing steady improvement. We are making progress in addressing the financial business, which was identified as an issue in Q2 financial results. In Q3, credit card business mainly drove profit growth with operating income up by 30.5% year-on-year on a cumulative basis.

As shown on the right, the bank's deposit procurement capability, which had been a challenge, has improved steadily and the personal deposit balance expanded by 1.3x year-on-year and number of gold credit card members also increased steadily by 24.5% year-on-year.

Another challenge for us, namely the Business Services segment. Here, growth was seen in each business area. As shown on the left, the growth of the third quarter alone was plus 7.7%, showing a strong momentum. In particular, the BPO/SI-related services, which had been identified as an issue in the first half, turned around and increased profits in the third quarter. On the right-hand side, IoT drove growth, increasing about double digit year-on-year. And especially IoT, including the SORACOM, the connections exceeded 66 million. On the left-hand side, we have the Lawson and Ikeda City in Osaka, we are working on the development of the town where you can leave in a secured and safe manner. And on the right-hand side, we are using drone to instruct the disaster-related location and we have more 1,000 locations where we have the drone ports, and we'd like to construct very agile and safe system for the disaster.

And now the management platform and how to strengthen it. In light of inappropriate transaction of our subsidiaries, we will be even more conscious of the importance of governance. And as you can see on the left-hand side, we have the KDDI philosophy, which emphasizes the human capabilities and the KDDI version of its job-based personnel system has created a mechanism to enhance expertise. And as shown here, with the shift to a new management structure, we will further strengthen our core competencies by combining these with our aspiration to be a company that inspires challenges. To take on challenges, we will introduce systems and programs that celebrate challenges and promote collaboration and advance human resource development in line with our business strategies for growth.

Now I'd like to talk about our efforts towards growth in the AI era. As a social infrastructure provider, it is our responsibility to support Japan's digital society and contribute to strengthening industrial competitiveness with both our cultivated communications infrastructure and our new AI infrastructure. As AI becomes more widespread in a variety of settings, an AI infrastructure that can process data securely with low latency will be important. Left side, with an eye towards such era, we ensured sovereignty and began operations at the Osaka Sakai Data Center in January as a data hub for securely processing corporate data. We have achieved efficiency gains by utilizing the existing space. And following Sakai, we plan to launch the Miyazaki Network Center in February as a communication hub, leveraging the knowledge gained at Sakai to expand into an AI data center.

So we will expand operations in the counter region and Kyushu and so on. and utilize our existing landing stations to connect AI data centers with our strong communications network, building an AI digital built, a nationwide low latency network and AI computational infrastructure.

We will also utilize the landing stations and submarine cables across the country to enhance the value of the AI digital belt. And we are going to create a hub by connecting landing stations and submarine cables. KDDI possesses some of Japan's leading know-how and assets covering everything from submarine cable installation to maintenance with over 60 years of experience, 360-day availability and landing stations across the country. We also strengthened Universal Joint connection technology for optical submarine cables and possess world-class technological capabilities. By leveraging these assets, we will develop landing stations near AIDCs and expand accessibility by AI computation infrastructure to overseas locations, thereby capturing global demand.

Today, at the Board of Directors meeting, we decided we resolved to launch a new AI integration business cooperation. The communication platform on top of that, we need this AI platform. We have lots of contacts with customers. So the AI is -- in order to deliver AI as part of the labor force, it is very important to have solid platform. And for that, we are going to utilize our expertise and technological prowess. And also, we will integrate consulting professionals from the headquarters. And based on that, we established KDDI iret. And going forward, we will also call upon more engineers from outside, targeting at about 3,000 personnel by fiscal year 2028.

Next is today's summary. First of all, the Special Investigation Committee will continue its investigation into the inappropriate transactions while the company reviews and strengthen its group governance and examines recurrence prevention measures. As to the impact amount, it is expected to include the reversal of fictitious sales and profits as well as provisions for amounts that flowed outside the company. The company will make every effort to recover the externally flowed portion.

As to the schedule, as I mentioned earlier, targeting at the end of March, Special Investigation Committee is going to issue report on the investigation. And based on the results of investigation, corrections to prior financial statements and FY '26 March Q3 results will be disclosed by end of March and FY '26 March full year results will be disclosed without a delay.

In the third quarter, core businesses performed very steadily, especially mobile structural reforms progressed as planned and the business foundation, including focus areas, continued to grow solidly. AI social implementation initiatives, including the AI digital build and the AI development platform are making steady progress. Even with the impact coming from inappropriate transaction, our business is performing well. And also, there is no revision to the dividend forecast for fiscal year '26 March. Thank you very much.

We will now move on to the Q&A session. [Operator Instructions]. We will take questions from front.

Koma is my name. So about this fictitious transactions, I do not have the full understanding. So let me ask you a question. So about the amount. So maximum amount is this amount that you have shown here?

Thank you for the question. As of today, the amount that we have confirmed, the impact on revenue is this amount and the profit impact is minus JPY 50 billion. And there's a possibility of additional impairment, but the Special Investigation Committee and the audit firm will confirm and there may be a possibility of revision going forward.

And this external flow, JPY 33 billion, if you could explain the scheme once again. So, this external flow, so upstream advertising agency and the three subcontracted party, was this external outflow from to those parties? Or was there an investment by the employees?

Yes, if you could turn to the scheme diagram. Basically, this was a fictitious transaction. The agencies received the commissions of the transaction. It subtracted the fee. So the amount is this external outflow recorded as fees? I see. So this is shown here. So, to five companies, the fee was provided in this fictitious transactions, the advertising fee that goes to the publishing agencies was also returned. G-PLAN and BIGLOBE commission was also external outflow within the group. G-PLAN and BIGLOBE fees that were deducted fees was posted, but that was fictitious. And so the sales and profit was reversed. So that's shown in orange on the upper half.

Next questions? D3 on the internal side, please.

Kobayashi from Yomiuri newspaper. I want to clarify some facts. This [indiscernible] the booking, when did it start? And also, how many employees have been involved? I ask those questions.

So multiple number of years, that's a recognition. As a result of internal investigation, G-PLAN, this business started in 2017 and BIGLOBE, they started this business from FY 2022. This time, there are some fictitious transactions and non-fictitious ones. But the amount shown in the materials, they are all based on it, all of them are fictitious transactions. And as to the number of employees involved, G-PLAN, two, I understand that the other two are involved from the G-PLAN. And these two are seconded to the big globe and these transactions were conducted by them. That's our current recognition.

So these two people, 2017 and onward, they booked inappropriately. And the total is JPY 246 billion. Am I right?

From the very beginning, when the advertising business was started, it is included in that amount. But from when and from where the investigation committee is still investigating it. And those numbers are as far as we recognize. So the more precisely, the committee will receive the report.

Am I right to understand that the employees of the KDDI are not involved, right?

As to this, the commercial flow, we have already confirmed that no employee from KDDI has been involved.

[Operator Instructions] Fourth from the front to the exit, please.

Sankei Newspaper, [indiscernible] is my name. First question. So when it started, this overlaps with the previous question, but the business started in 2017. And since then, this has been conducted. So from before the business started, the scheme was anticipated and started the business on top of based on that? Or did the business start first and then this fictitious transaction started? What do you think? What does the investigation look like so far?

According to our understanding, the amount started becoming big in recent years. And so we said we have to have a control -- tighter control internally. So until when the transaction was authentic and correct, this is still being investigated by the investigation committee.

One more question. With this scheme, #1 and #3 were the same entity. And these agencies had to be part of the collusion. So the recovery of JPY 33 billion, will you request for the damage compensation to the agencies? Or will they be sued for criminal lawsuit?

Thank you for the question. First of all, we will wait for the result by the Special Investigation Committee. And according to that, we will take appropriate measures.

Any other questions?

One please. [ Fujita ] from Asahi Newspaper. I would like to clarify some facts here. So this diagram of the fictitious transaction 1, 2, 3, the advertising agency, is this just a single agency or only #2 is a different agency. Multiple number of agencies are involved. #1 and #3 are the same. There's a note on the right-hand side. So that #1, #3 are the same entity. It's just one company, you mean.

Yes, we have just confirmed one and others are yet to be investigated. G-PLAN 2017 and BIGLOBE from 2022, #1 and #3. So it's not about this #1 and #3, the same entity. The 2017, when we calculated the amount, we just assumed that from the very beginning, everything was fictitious. So, back then, this entity is the same entity. We are still investigating it. So going forward, there's a possibility that there is non-fictitious transactions might be detected.

That's right. As to the amount to be canceled. So about those amounts, it's not that everything is based on fictitious transactions. Well, basically, when the amount started to bigger, we thought that they were because of fictitious transactions. But as you can see at the footnote, it is either on the total sales amount or the pure sales amount. So, recently, the profit the cancellation that is getting canceled more and the transaction itself is getting bigger.

Next question, please. So A4 towards the MC.

[ Niki Subo ] is my name. In the last financial results briefing, there was challenges you mentioned, the deposit procurement capability. I have a question on that.

And then about AI-related question. First, on the deposit procurement capability. You said you are enhancing the capability. Could you elaborate on that?

Thank you for the question. So, Jibun Bank program, we are trying to enhance the benefit, but not only that, the channel, there are multiple channels. And so we're trying to appeal and working with securities brokerage partners, enhancing that to expand the deposit. And the other is plan benefit. So money activity too is launched. On the bank side, we are focusing on the plan. And so the individual personal deposit is increasing on that side.

Next, a new AI company. You're working on the implementation, you said, trying to establish the development infrastructure. In the financial industry, the AI is used more and more. So, in the financial industry, what kind of implementation are you working on or planning?

Katsuki-san would like to respond.

Thank you for the question. AI implementation. In various industries, there are common areas. First, contact center and the fraud detection, AI will start from those areas. In our financial group, we are studying, examining the possible implementation and working with other financial institutions to conduct the POC, proof-of-concept.

So, SoftBank has been on that, the contact center. So if you could say a little more about what you're trying to do in the new company, what is the significance of this new company?

Well, this new company is not solely for financial industry. And as we announced the Sakai last time for pharmaceutical companies and others, data, internal data and know-how that Japanese companies have will be used, managed for AI analysis. So we are being approached by pharmaceutical and other industries. Katsuki-san just talked about the financial industry, but that is the initial step. The call center is the first step. So thank you. I hope you could understand.

Next question, please. The D2, please.

[indiscernible] As to the inappropriate transaction, the two people from G-PLAN, and they was seconded to BIGLOBE from when?. And these two employees, are they managers or executives?

Thank you for the questions. It's related to their privacy. So I would like to refrain from answering those questions, sorry.

So, B3, please.

[indiscernible] About this matter of inappropriate transaction. These two people, they were seconded to BIGLOBE. That means that they had authorities to work both for G-PLAN and BIGLOBE. They were seconded from G-PLAN to BIGLOBE and the BIGLOBE launched this new business and these two were working on that new business. And during the secondment period, they will also be able to work for Jan as well?

Yes, usually, yes.

As to KDDI, to reduce the downstream the ad publishing, the request to reduce it, when did it happen and why?

It was the mid-December last year. Back then, in order to strengthen the control because the amounts were getting larger and also we need to identify the risks for business. So, as to these two companies, we issued such instruction to reduce the volume. That means back then, you knew that there had been some the fictitious transactions. The specific doubt, we reduced the orders and the other payment was delayed from upstream. When that happened, we thought that we had some doubt beginning -- well, beginning to have some doubt about those transactions.

In October 2025, the auditing firm pointed out some potential the fictitious transactions. And this is the table of the research. So we involved the outside the auditor and the internal auditor together started some -- the investigation. But back then, they could not get any specific evidence.

Thank you. Next question please. We'll move to the online for now. [Operator Instructions]

Thank you. So about the fictitious transactions, so the external outflow portion, this is #1 and #3 companies. It's the amount that is paid to #1 and #3. Is that what you mean by external outflow? Or were there a possibility of outflow to other parties as well other than #1 and #3?

Thank you for the question. So you can see this on the screen. On the right side, it says external outflow. This is the gray area. So #1 and #2 -- well, #3 and #1 are the same. So #1 and #2 paid as fees of the transaction. But this transaction turned out to be fictitious. So this is the area that is outflowing -- outflow externally.

Another question from online from [ Toizai ].

Question about inappropriate transaction. At this moment, why did it happen? How are you looking at the reason? The investigation committee is yet to come up with the conclusion. But at this moment, what is your thought?

Thank you for the question. As to the reason why, of course, we are doing investigation about it. And at the same time, the times, for example, are there any signs for such a matter to happen, we need to avoid reoccurrence of similar matters. So, in December -- I mean October 2025, there were some points made. But as to the documents, the billings and the receipts, which are the evidence of the transaction existed, and there were no problem about the impairment and outpayment, and we were told that there was no problem from the big as well.

And in this advertising and the business, there are lots of people involved from downstream to upstream. And we didn't look into a very extreme of the floor. So I think that's part of the reasons this kind of matter happened, and that's some -- I think that we need to make improvements.

Another question. So there is a governance issue. You have many subsidiaries and your business is diversified. So a company, what kind of governance issues do you recognize? And what kind of actions you would like to take about them?

Thank you for the question. We have been expanding our business, including outside directors. the corporate ethics that should be better actually that we received such point from the directors. And since last year, we have been working on that and still this kind of matter happened, and I feel very sorry about it.

I think there are two things. We have KDDI philosophy to raise a spirit to improve our mindset. The KDDI and group companies together, we would like to make repeated efforts so that the philosophy will be well embedded in the organization. And also how to prevent such the matter, that process for that is yet to be established. We need to brush up our detection capability to see any signs.

[Operator Instructions]. Line B4 towards the exit, please.

Yomiuri newspaper. [indiscernible] is my name. So my question is also on fictitious transactions. So in this scheme, #1 and #2 agencies.

So it was elucidated because the payment was not done. Did you contact these companies? Is the business continuing? So that's my first question.

And number two, in the scheme, how involved is this company in the fictitious transaction? In this business flow, were they used -- or did they collaborate? Did they contribute to the fictitious transaction?

Thank you for the question. The transaction is, of course, stopped. It's suspended. With some agencies, there were collaborations, but we think -- but this accuracy is now being investigated by the Special Investigation Committee. So number two, so you think some of them were collaborating, but I don't know a big picture. The big picture is now being investigated by the Special Investigation Committee.

Any other questions? B2, please.

I am from Nikkei Newspaper. As to detection process, JPY 250 billion, the fictitious transactions. Why was it possible? I wonder. What kind of supervision did you take in the past?

You mean the supervision on the results?

Yes.

The billing and other slips documents were there and G-PLAN and BIGLOBE based on those documents, they did issue results.

Understood. In this -- the commercial flow, so two companies, the parent and subsidiary were involved. Is there any particular reason for that?

The BIGLOBE came into the picture not from the very beginning. So, compared to G-PLAN, because of the level of the trust and the credibility, the BIGLOBE has started its operation as a new business.

Next question, please. B3, third row towards the exit, please.

Sankei newspaper, Fujia is my name. So my question is on fictitious transactions. So it's cumulative, but JPY 246 billion impact on sales. So this is quite large. Each individual transaction was large amount or just accumulated to be this big. So number of cases or the transaction volume value, I don't -- I know you cannot go into much detail, but just a rough image, if you could elaborate to -- for us to get a better image, please.

Thank you. So as I mentioned earlier, recently, a few tens of billions of money had been circulated back. In the scheme based on the assumption that the amount goes up month after month. And so it gradually increased and amounted to a few tens of billions of yen. So including previous years, JPY 246 billion. So this is the size of the transaction.

How much per case? If you explain this may be too much detail, but the advertisement, how -- what's the size per case of transaction?

So it's -- I understand that it was circulated back in its snowballs. I understand that, but still the amount is large though. You are right. Basically, there was the report, the -- so we validated the validity of the transaction. But this is the fee for the posting of the advertisement and paid to each advertisement agency. So it was not for each individual advertisement.

Any other questions? Question from B1, please.

Two questions. Yesterday, NTT DOCOMO, Mr. Maeda, President said that there is a very intensified competition. But previously, the announcement of the results, you made a shift to the LTV from the excessive competition. As to new customers and the competition for new customers, are you slowing down your efforts? Are you slowing down your speed a little bit?

As I mentioned in my presentation, the mobile revenue is increasing. And the promotional cost, I said the last time, the year-on-year basis, our promotional cost is flat. So it's not that we are using a lot more compared to the previous year.

And the impact -- as to the impact, for example, the handset replacement program, there should be a good balance there. But in the third quarter, the [indiscernible] plan that is producing the good benefit for this year.

My second question, Rakuten Mobile exceeded 10 million contracts to the end of last year. And I think roaming I think there are some difficulties, but could you please talk about the direction and your thought on this area as well?

I cannot talk about the other companies, but the competition and collaboration for roaming included, and we are also competing with them as well. So, in September this year, we are discussing with them for the roaming for September this year.

The other day, the Rakuten was faced with some communication failures. And that pushed a lot of traffic toward us. The areas, in other words, are overlapping. And that should be sorted out. So -- and we are going to suspend the part of via the communication in the due course. Thank you.

Line A row 1 towards the exit, please.

[indiscernible] is my name. I have a question on your business. On Page 17 of your presentation, you talked about the Netflix, the differentiated service subscriber is now 9x bigger. So the pricing plan, subscription, how much track record do you have as au? And regarding Netflix, LYP premium, [indiscernible] is now launching a new plan, so Netflix can be used. So what do you -- how do you see the impact there?

Thank you. So the original -- it's not the original Netflix bundle, it's subscription. So 20% point back if you subscribe and maximum five months, you get free. So that's the campaign. au and UQ customers. And of course, there's the product appeal of Netflix that attracts these users, but we want this to be used. So, from March and April onward, we will continue. And as I showed, this will lead to the long-time usage. So this is a bit different. The users may be a bit different from our peers' program.

One more question is on your CapEx, your thinking on CapEx.

In yesterday's NTT DOCOMO briefing, they said in their CapEx, they're increasing from last year and FY '26, they will build the base station quite aggressively. And by next year, they said they will catch up with the other competitors. So not all base stations will directly lead to the communication quality, but you will be caught up.

So based on that assumption, what is your thinking on your CapEx? Any changes there? Or will you just keep your CapEx plan unchanged? If you have any questions, please -- if you have any comments, please.

So we think this area expansion is the source of competitiveness. So we will continue executing and continue being the winner by the outside rating evaluation companies. Regarding 5G, we did quite a big investment last year. And so it's well built, and it has peaked out. So instead, we are now moving -- focusing on AI infrastructure and thinking of keeping the capital expenditure flat.

Any other questions? The person at C1, please.

[ Ishikawa ] freelance journalist. The net increase in smartphones compared to the DOCOMO compared to the last time, it seems that the number is rather low. Are you satisfied, Mr. President?

Thank you. This is related to structural reform. There are pros and cons, we need to strike a good balance. The smartphone, the numbers, 33.3 million. That's the target toward the end of the year. And June and September, plus 30,000 plus 20,000 and this time, plus 70,000. And in the fourth quarter, we will see more growth. Rather than taking excessive increase, we would like to focus on the contribution to lifetime value. So those numbers alone are not the basis for us to increase the number. Yesterday, DOCOMO talked about the following thing, the performance aggravated because too much the competition for the handset.

As to the replacement, do you have a good control on the replacement program or the purchase support program and the [indiscernible] is also revisiting the issue. Are you changing any thoughts?

As this slide shows, we think that we have a very well-balanced control. In the past, we struggled a little bit, and that is because why we are controlling it a better way. And of course, new functions and new handsets, we would like to deliver those new things to the customers and striking good balance.

When you say control, exactly what are you doing?

From the customer's point of view, I want something new. And after 24 months, it gets more expensive. If that's the case, of course, the customer comes in to replace it with the new one. The first such -- we -- in the past, we did not understand what could happen correctly, but we made some adjustments. And based on the plan, we are building this the scheme of control.

So, next question, please. Line B row 2 towards the exit, please.

[indiscernible] is my name. So I would like to go back to the fictitious transactions. Earlier, you talked about the two members from G-PLAN. So I have a question on those two members. So these two were originally in G-PLAN or -- so when this intermediary business was launched, they joined. So my first question is that.

I am sorry. We have identified the two, but I'd like to refrain from mentioning that because it has to do with their privacy. So those two, from around 2017 until this was discovered, they were in this intermediary business throughout. We want to wait for the investigation result on that as well. Basically, as I said earlier, from 2017 onward, it's been recorded. So we are trying to understand how much of that was correct and how much is fictitious. So this needs to be elucidated through the investigation.

My last question is those two for the disciplinary action, are they G-PLAN staff? Or are they already fired? Are they former employees?

We are still contacting them. So they are staff employee.

Any other questions? Please raise your hand. A person at C3, please.

[indiscernible]. So number one, #3 or #2, the external flow to whom or to what kind of company like sector or business form size, is it possible to share some information?

As to the other companies that the flow went to, the committee is investigating it, and I would like to refrain from talking about specific names. It is not -- but it is not large ad agencies. The anti-social organization or suspicious of the kind of status is involved. And that also is being investigated. At this moment, there's nothing we can talk about it.

Next question, please. A1 towards emcee, please.

[ Nakamura ] is my name. I have a question on the fictitious transaction case. So the two that are suspected to be involved, what was the motive or reasons or trigger? Have they talked about that?

We want to not impact the investigation of the Special Investigation Committee. So allow me to refrain from mentioning that today.

Yes. One more question is going forward, so in the -- where a large amount of money is involved, if there was a falsification of the document, that may be another crime. So have you submitted the damage to the police or have you taken actions?

Yes, we are aware of that. We have not consulted with the police yet, but depending on the progress of the investigation, we will consider that and take appropriate actions.

Any other questions? Next D1, please.

[indiscernible] As to money coming in, the advertisement and the fees move together. And recently, it's the level of dozens of billions per month, including fees. And the fees are the ones which are counted as revenue?

So it's about the gross amount or net amount. So it looked like the revenue canceled decreased, but it is based on net basis. So as you said, it's correct that the fees are counted as revenue. I think there should be some fund, the initial fund for advertisement, right? The amount increased dramatically to a very big amount. BIGLOBE and G-PLAN, they had fund at hand. And also, we have group finance mechanism. For the whole group, we have surplus and KDDI kind of concentrated and at headquarters. And from the headquarters, we lend money to the other companies. So the group finance was executed for BIGLOBE.

The telecommunication-related investment and last year, JPY 57.9 billion or so lending was extended to BIGLOBE last year -- last fiscal year in the group financing. And so group finance is -- might be used -- might have been used as part of this incoming money.

And as to these two employees involved, both of them were seconded BIGLOBE, but they are G-PLAN employees. And at this moment, you have not confirmed any other employees involved.

Yes, your understanding is correct. At this moment, we have not confirmed any other employees involved. But that is also subject to the investigation by the committee.

Next question, please. Line D towards the emcee, please.

[indiscernible] is my name. So fictitious transactions, #1 and #3. there's #2 in the middle. So number three, other -- unless the order goes to the #3, the money does not circulate. But was the scheme such that the money will always go from #2 to #3? Is there #1 company and #2? Usually, I think it's multiple. But in this fictitious scheme, was there one particular company that was in charge?

From BIGLOBE and G-PLAN, the upstream companies contract and the contract with the publishing agency. There were two types of contracts. And I mentioned the business practice, commercial practice. And what's beyond this downstream publishing agency, we usually don't see that. We were not looking at what's beyond the publishing agency. Now the money stopped coming in from the top. And so we heard from the employees. And after we heard from the employees, we found out that it was subcontracted from #2 and 3 and #1 and #3 were identical.

Any other questions? The person at B1, please.

[indiscernible] freelance channel. Starlink related question. This year, other carriers are going to start the satellite telecommunication service within this year. You had a lead time of about one year. What is the advantage? Do you think that there is an advantage for you? And how are you going to differentiate yourself this year? Are there any specific measures?

There is something that you can look forward to. I would say, Starlink Direct or area, we would like to deliver it right away. And with that in our mind, we have been developing area and Starlink the direct as well. The sooner, the better for customers. As to the lead time advantage, without thinking about other companies, as a frontrunner, we would like to work on something new. not just at area, but Starlink Direct, we would like to make advancements with something new all the time.

Line B4 towards the emcee, please.

[indiscernible] Sorry for asking you another question. Just one clarification. So fictitious transactions, the impact on your financial results. Earlier, you said from 2017, the business started and sales, you mentioned full amount. But as the investigation progresses, the fictitious portion and the actual transaction will be clearer. So this amount is the current estimated amount or this amount is subject to change as investigation progresses?

For now, this is the maximum amount that we are expecting. But the fictitious transaction started increasing in recent years. So we think fictitious portion will account for a large portion. So now -- so this is the amount that will be reversed. Is this already fixed? Of course, it depends on the special investigation committee and the audit firm's audit. So this is subject to change. But we understand that this is the maximum amount. So we are showing you the approximate amount.

Question from online.

[indiscernible] Jibun Bank and the deposit funding and the improvement and the impact of the money activity too. You talked about other reasons as well -- factors as well. What is the impact coming from the money activity? You talked about the reimbursement, if it is over 500,000 and so on. Any impact there you've seen? And also card business is also growing. Is also driven by the money activity or any other factors?

Katsuki-san, anything?

As to deposit funding, there are two factors, as I mentioned earlier, the bundled -- the deposit bundled plan, the money activity two and au Jibun Bank's own campaign during the bonus season, for example. such deposit collection campaign worked. And as you can see later, the operation data, you can look at Page 36 of operation data. Y-o-Y deposit increased significantly, especially retail deposit. As you can see -- so it's not really the growth coming from the money activity. We do not disclose it. Please bear with us. And the credit cards, especially for money activity too, the growth of gold card is paying off. As you can see on the screen, -- we are seeing good effect coming from that. are you okay with that?

So another question from online.

Yes. I think this question has been raised a few times, and I'm sorry about the impact of the fictitious transactions. So, 2024 March, so JPY 96 billion before March '24. So G-PLAN started -- since they started the advertising business, this has been posted. So the fictitious transaction started from the start of the business. Is that how this was recorded? Or there was a starting line when this started. And you summarized the amount up to March '24. So what is the time line.

Thank you very much for the question. As an internal investigation, we found out that before year ending March '24, each company -- so all transactions since they started the advertisement business has been summarized. So in case of G-PLAN from 2017 and BIGLOBE 2022, they started the advertisement agency business. So it's a summary of all the amounts. So it started from -- not from there onward, but from the very beginning, the fictitious transaction was likely to have happened from the beginning of the business. Well, the authentic correct transaction and fictitious transactions are now being separated, but now we're seeing an increase of the fictitious transaction portion. So -- we are looking at all the transactions with a view that there is a possibility of future transactions.

Understood. So including those cases that were correct in the past, you are checking all cases. You don't know when the starting line was, but you're including everything.

Yes.

Including the ones that may be correct. So the maximum amount is a revenue of JPY 246 billion and JPY 33 billion, the external outflow, is this maximum or at least or this is the maximum amount.

So this time, this is the external outflow. So we are provisioning this amount shown on the table. We think this is the maximum amount.

One more question online. Horikoshi-san of Nikkei business.

Horikoshi speaking. Two questions. First, in appropriate transaction. So, within this, the scheme diagram, #2, it could be involved from the very beginning with #1 and #3 or it could be involved later. So in the supply chain as a whole, my question is why you did not detect such the transactions?

I think it is because of failure of the control scheme.

So do you -- could you please share with your thought?

So, the group governance, and it is related to the responsibility of supervision. So Monthly transaction itself has the vouchers and slips, accounting slips, which verify that the transactions occurred and they were continuing this business as normal transaction. And the BIGLOBE also gave us some information about the appropriateness of the transactions as well objective. But the objective evidence was not detected about the inappropriate transaction. So it took time for us to detect all that. So as I mentioned earlier, group finance is part of the picture. Ad network accounts for most of the amount. that is currently being investigated. So I do not make any comments on that.

And second question is about the Miyazaki data center. Two years ago, you did some construction work. What is the size of the investment? And what is the size of data center?

As you can see on the screen, AI digital belt concept or initiative, you have about -- there are about three big data centers.

Are you going to open three big data centers in Japan? Or what about Tohoku and Hokkaido area? Is there any possibility for you to go to those areas as well?

Thank you. The belt diagram is showing that there is no coverage in the north. But actually, we are constructing the but in the north as well. Putting aside whether it's big size or not, what kind of AI data center should be there that is in our mind. The AI processing will be happening in the different locations. So it's not that everything will be concentrated on big data centers.

So the connection like mesh and as a whole, the belt, which covers the whole -- the Japanese archipelago, that's what we are thinking about. Miyazaki, we have secured the adjacent land so that we can easily expand this location as well, watching closely the demand level, we are going to make next moves. In the next midterm strategic -- midterm strategy, we are going to give you more details. Thank you.

So next question, please. D3 towards the exit, please.

Yashi is my name. Sorry to ask you. So JPY 33 billion external outflow is my question. In Q3 -- up to Q3, JPY 17 billion has been provisioned, if my understanding is correct. And maximum JPY 33 billion has flown outside. So in KDDI's P&L, how much will eventually be posted as loss? So that's my first question.

Thank you for the question. So this year impact. We need to wait for the result by the Special Investigation Committee for the amount to be fixed. But for now, this amount that is shown vertically will be posted on our P&L. So JPY 33 billion, and there may be additional impairment. For this fiscal year, JPY 17 billion is provisioned. So reversal of profit is JPY 25 billion. And other than that, there is a possibility of impairment in addition.

So then JPY 33 billion can -- may not be your loss. So of the JPY 33 billion and JPY 17 billion, I'm not understanding the difference between the two. Are there prior year portion? So how can I sort this out?

So this table is grouped into #3. First, March '26 is up to Q3, the provision up to Q3, this is JPY 17 billion and JPY 33 billion to the right is including the prior years, it's the total of prior years. So including that, it is JPY 33 billion. And this is assuming that we cannot recover the entire amount. So we will provision this for once for now. But if we can recover, of course, we're trying to recover. And if the amount can be recovered, the recovered portion will be added to the profit in the following years.

Then at this point, JPY 17 billion loss is provisioned or is assumed for this fiscal year.

Yes, this is the expected loss.

One more question, please. So there are a few advertisement agencies. So those that were involved in the fictitious transactions, do you know how many advertising agencies were involved?

We only know that multiple are involved, but we don't have the exact number or the names that is left in the hands of the Special Investigation Committee. Is it 2 or 3 or maybe 10 agencies? I'd like to refrain from mentioning that as well.

Any other questions? Since there are not many questions left. The two people are raising their hands. So starting with A4, the person at A4, please?

Last week, DOCOMO using DOCOMO shop, they will give support for financial business. I think they already started it actually. What about your company, for example, the opening account for the Smart Securities or are you planning to use shops for providing similar support? Could you please talk about your thought?

au Jibun Bank and we have been providing support using the au shops as the other agencies for the au Jibun Bank. In addition, we have credit card business as well. So I think your question is about the -- based on the securities and the salesperson qualification. For that online intermediary securities, SBI SECURITIES using the au Jibun Bank, that kind of alliance is our current focus. So when it comes to the securities sales rep, which requires special qualification and development of such personnel on real world, we are not thinking about it at this moment. I answered your question.

It's not only about securities account, for example, the various services of the au Jibun Bank or mortgage loans in those areas, what is your thought? And of course, always we are reviewing every potential possibility. There are various financial services and some new emerging financial services, especially au Financial Holdings, as to their operating areas, we would like to give serious thought. Have I answered your question?

So the last question, C3 towards the entrance, please.

[indiscernible] again. So regarding the fictitious transaction, so the two employees were involved, you said. So if I could put this in perspective, the two are still seconded to below. They are -- yes, G-PLAN employees seconded to below. So seconded to below -- and there are multiple -- so they are belong to G-PLAN. So they're seconded to G-PLAN. But why despite the absence of the two, can this transaction continue?

So they're not in G-PLAN, but why can they operate G-PLAN's transaction or can be involved in G-PLAN transaction? So they're dual headed. They're seconded, but there is a proportion between the second destination and the source company. So they are dual headed.

I see. So the two employees, so they were not checked. The transactions that the two were involved.

So the transactions that only two of them were involved were fictitious. So this fictitious transactions, we have elucidated up to now this much fact is already clear. There are authentic or correct transactions as well. So we're trying to draw a line between the two. And for the ones that were involved in BIGLOBE and G-PLAN, they are fictitious transactions. That is our understanding. So we're trying to have the special investigation committee -- check the accuracy of that. #1 and #3 were identical companies. That's one company. So yes, one entity, we want to refrain from saying how many companies they were, but the hearing or the entry withdraw money and digital forensic is utilized and understood that 1 and 3 are the same. That's what we're saying today.

And last question. So in your investigation so far, have you heard any motives or reasons to this were pressured to have large sales? Or were they just trying to invest all the money or the special investigation committee is investing that it's their scope.

So I want to refrain from saying anything here. But of course, BIGLOBE is a business operating company. So the development of the business plan and the target management is done. But from our company, we have a medium-term plan. We are in the final year of the medium-term plan. So communication and financial or DX and enterprise business, energy, these are our main businesses. So this advertisement agency business is not a driver for us to achieve the medium-term plan target. Now the amount that you found out this time in each year, BIGLOBE and G-PLAN, what is the proportion of this in BIGLOBE, G-PLAN's revenue? BIGLOBE and G-PLAN are consolidated. BIGLOBE revenue is around JPY 230 billion. And this is last fiscal year and of which this is JPY 82 billion.

With that, we would like to conclude the Q&A session.

Lastly, I'd like to say a few words. Again, we are very sorry for this matter. And of course, we are going to avoid reoccurrence and strengthen our governance. And at the same time, we are going to solidify our business platform to grow our business. And that is the path that we need to take to take our responsibility. And I will take the lead in making efforts, and we will continue to make advancements. Thank you for your continued support.

We will conclude this meeting. Thank you very much for joining us today.

Earnings release event for the second quarter of fiscal year ending March 2026. Later, we will have Q&A session as well. Thank you very much for taking part despite your tight schedule. I'll be serving as moderator. I am Miyakawa from IR Department. This event is being live streamed with simultaneous interpretation between English and Japanese. And also, this event is -- can be viewed an on-demand basis on the website of our IR department.

Let me introduce our participants. Representative Director, President and CEO, Matsuda; Representative Director, Executive Vice President, Executive Director of Business Solutions sector, Kuwahara; Director, Senior Managing Executive Officer, CFO, Saishoji; Director, Senior Managing Executive Officer, Executive Director, Personal Business Sector, Takizawa; Managing Executive Officer, CSO and CDO, Katsuki; Executive Officer -- Executive Director, Corporate Management Division, Aketa.

We have 3 types of documents regarding earnings posted on our IR site. And also, please refer to our disclaimer regarding the content of the presentation as well as the targets such as number of contracts that may be referred to in the Q&A. Matsuda, President, will give a summary of presentation. And then after that, we will have Q&A present. Matsuda, please.

Let me start my presentation earnings results for the first half financial -- for fiscal year ending March 2026. I would like to explain the following 4 points today. First, I will discuss the consolidated financial results. These are the highlights of consolidated results. We increased both revenue and profit. We are making progress toward achieving the EPS target as planned. Operating revenue was JPY 2,963.2 billion, a 3.8% increase year-on-year, 46.8% of the full year forecast. Operating income was JPY 577.2 billion, up 0.7%, progress rate of 49%. Net income or profit for the period was JPY 377.7 billion, up 7.6% with a progress rate of 50.5%.

Second quarter year-over-year growth was strong with operating revenue up 4.1%, operating income, up 2.9%, net income, up 18.6%. As a topic, I would like to explain the Q-on-Q situation of the performance in Q2. During Q2, we saw the effect of our price revisions become apparent and achieved solid growth.

Quarterly operating revenue increased 6.3% Q-on-Q. Quarterly operating profit increased by 11.8%. Our profit during the quarter grew by 20.7%. And next, I would like to explain the factors behind the changes in consolidated operating income. Each business grew offsetting the impact of prior year sales promotional expenses. Mobile in the Personal Services segment increased JPY 11.1 billion year-over-year and income from finance and energy business and also equity method profits combined increased by JPY 12.7 billion, and DX increased by JPY 3.9 billion, technological structural reforms up by JPY 9.6 billion.

And we -- the impact of prior year sales promotion expenses, negative JPY 1.2 billion was overcome, and we're expecting to see accelerated growth. These are the key points of consolidated operating profit in the second half to achieve full year targets. The mobile business is to accelerate growth with our target of value enhancement through service revisions with the second half year-on-year growth exceeding approximately JPY 19 billion over JPY 30 billion growth for the full year, combining DX, finance, energy and Lawson equity method profit being aimed for an addition of approximately JPY 30 billion finance which is key, will shift to a strategy with greater focus on loan-to-deposit ratio, while DX will be placed on a growth trajectory through initiatives, including a turnaround of BPO business and positive impact technological reform is approximately JPY 13 billion, second half increase up JPY 55 billion to achieve full year target. The negative impact from prior year year sales promotions will end in the first half.

Next, mobile structural transformation. This is about virtual cycle created by power to connect. And prices, we aim to create a virtuous cycle of growth, providing new value to earn revenue, returning that value to stakeholders and reinvesting for the next area. We're able to create value because of the past investment and that cycle is starting to kick in, I feel. This average cycle growing together with our partner will be continuously implemented.

In this cycle, I would like to talk about our mobile business. Our mobile business is undergoing structural reforms, so focused on lifetime value. As is in the diagram, our focus is to make sure that each brand of ours meet such customer needs so that they will continue to use our offering over the long term. Now for UQ Mobile customers, we would like them to see the value and the attractions of au as a brand, and we are recommending migrating to au.

Now we will review plans and sales approaches that would induce short-term trends by customers who are only after incentives and benefits. In the process of structural reform, some customers who have not used our service for long, may choose to cancel their subscriptions, we are aware of that, but we would like to focus on the long term to drive ARPU growth through value creation and reduction in change by increasing longer contracts, so that we can have a leaner business foundation.

The announcement capability to offer connected experience and communication quality form the foundation of value creation according to Opensignal's usual user experience analysis following February, global #1 ranking. We achieved #1 in Japan for the third consecutive time last month. So based on this best network that we offer in the industry, we are enhancing our capability to offer a connected experience, and we are supplementing it with au Starlink Direct, which began data communication business in August. Many customers are already using this service.

So we would like to expand this value based on connected experience. au 5G line, even in crowded areas, you can have a sense of security being able to connect smoothly. And for au Unlimited data overseas, this is free of charge for 15 days, and it has contributed to a rising awareness that you don't need a WiFi router overseas. We have an investment in also. And so we would like to pursuing initiatives to enhance engagement by proposing savings and a sense of security in daily life. Ponta Pass and Earthquake Preparedness Support together with Dowa, we will provide a service within the year that deposits JPY 30,000 into au PAY balance of bank account of customers. This is all part of the price plan.

The effects of structural reforms are beginning to materialize. The initiatives we have explained so far have born fuel leading to growth in mobile ARPU, which contributes to LTV and churn rates are showing in improving trend. On the left, mobile ARPU has steadily increased this quarter reaching JPY 4,460 in Q2, accelerating growth with year-on-year increase of JPY 140, and smartphone churn rate improved Q-on-Q, year-on-year increase, so also narrowed from 0.17 points in Q1 to 0.12 points in Q2.

Now as a part of further effect, one of our indicators is a switching between brands. So brand switching, now from au to UQ Mobile, but brand switching from UQ mobile to au saw a positive reversal finally in September. This continues into October. So this is as a result of our transformation, making our main brand au more attractive and steadily changing the plans and sales approaches.

And on the right-hand side, for UQ mobile, there are initiatives to extend the contracts. As testimony together, there have been improvements in homes discounts and handset bundle rates. So these are the kinds of initiatives we are implementing deeply through such structural transformation, focus on LTV, Mobile revenue on a personal service segment basis has significantly surpassed last year's year-on-year growth in the first half reaching a positive JPY 12.5 billion accelerating growth.

And in the second half, we expect further improvements in churn rates and ARPU growth driven by progress in structural transformation, brand mix and expanding contribution from service provisions and the impact of subscriptions and mobile is expected to exceed initial forecast.

I will explain the initiatives to achieve the full year target. And we aim for JPY 55 billion increase in profit is our target. And as in the focal area, we aim for JPY 30 billion scale increase in profit. The focal area. Energy and Lawson are progressing well. On the other hand, finance and DX are recognized as challenges due to changes in the business environment since the beginning of the fiscal year. I will later explain initiatives for these 2 later.

First, finance. We are now in the world with interest rates, so the competition is intensifying over deposit. We -- instead of depending on the housing loan, we will shift our strategy, mindful of loan-to-deposit ratio and the individuals deposit balance has grown by 1.3x. But in order to strengthen deposit procurement power, we'll be working on initiatives such as bank securities alliance. As for credit card membership, the expansion is urgently needed, especially for Gold Card, 1.72 million membership is what we would like to achieve.

As for the business segment performance, in the first half, operating income was plus 3.4% year-on-year, it's a somewhat slow result. Mobile, IoT and data center DL. On the other hand, BPO business and SI-related business, had a temporary profit decrease factors, so compared to the initial projection at the beginning of the year, we are behind the projection. However, we could identify, we have a clear outlook for resolving those one-off factors. So we have addressed the risk.

And all of the businesses is BPO business or Altius Link. Now since the first half, we are working on initiatives to defend a share of existing service and expanding services using AI. And in September, we could turn the tide and deliver increase in revenue and profit. And as a result of activated sales, new orders increased by 2.8x year-on-year, and the number of ongoing projects increased by 2x year-on-year. And also, we are proceeding with integration of internal systems as part of our efforts to improve efficiency and we are seeing results. And by maintaining the momentum we would like to deliver a turnaround in the second half of the year.

Also, in the second half as a driver for growth. So mobile and IoT are going to deliver a double-digit growth year-on-year. And in addition, our facility solutions, Starlink, Drones such new services are going to make a contribution to growth gradually.

Next, I will explain the initiative for the next stage of growth. 6 months passed since the launch of the new management structure and the construction of our future business foundation is progressing, including the execution of fee revisions. Considering this progress, we will discuss the new key themes we are focusing on for the next midterm management strategy starting next year.

On the left, theme 1, in the era of AI in addition to transforming infrastructure including telecommunications into a next-generation model, we will further expand our value added and growth areas by leveraging digital data and AI.

On the right-hand side, another thing, another key point. Moving forward, centering on the communication, we are now in the phase of delivering growth. So together with growth, return-based capital allocation is what we would like to do while being mindful of capital efficiency. For that, being mindful of the credit rating, we will use leverage, and we would like to maximize the investment capital and the growth investment will be made in a disciplined manner and we would like to make investment in the areas where we can expect high returns in medium to long term.

For other -- conversely for areas that do not meet the criteria, we will consider a review of business portfolio, including withdrawal. In conjunction with these ideas, we intend to implement flexible share buybacks alongside our commitment to stable dividend increases, by deepening our strength of sustainable growth in the AI era and pursuing quality with an awareness of capital efficiency, we aim to enhance corporate value.

Regarding the enhancement of network, in Opensignal, our ranking is #1. So in addition to Sub6, we are creating communication an area where we overlap millimeter wave on Sub6 and as for data center, this is the case of Telehouse. So Telehouse accumulated know-how both in Japan and overseas will be applied as we do so to prepare for AIH, we are expanding data centers. And in London, we will be constructing 6 data center in loan spending, total project cost of JPY 60 million. So real-time processing, such as inference AI could be supported power supply of about 57 megawatts at this London DC to come.

As for domestic AI data center, Telehouse know-how will be utilized, and AI data center in Japan proceeded quickly and Osaka Sakai Data Center will go into operation in January 2026. So by providing sovereign AI development environment in addition to training functions, we would like to build out distributed computing platform in various locations to meet the expanding demand for inference, this is consumer services based upon the strategic tie-up with Google Cloud. So now there are issues that contents are used without consent.

So it's -- this service provides a peace of mind to content providers and also the equity information can be provided to customers. So since our announcement, we've received inquiries from many content providers. And as the key strength of KDDI, we are advancing initiatives to create new value by combining real world digital. And with Lawson, we are working to continue our initiatives to generate value by utilizing technology, we will work to address societal challenges in Japan by utilizing the site here in Takanawa. And based upon the explanation, in the next phase, we will be moving on to the second round, the third round of the value generation cycle. So we will have 6G to follow 5G. So high-quality network and high value-added services need to be created for that, we will conduct a disciplined, efficient investment, and we will strengthen partnership.

And here is the summary at the end. Being mindful of lifetime value for mobile. Now the structural reform is progressing, and then on a full year basis, we have outlook for increasing profit by more than JPY 30 million for Finance and DX, we have identified challenges. And in the second half, we will be executing a strategy. So consolidated performance and mobile business is progressing in line with our projection at the beginning of fiscal year. And for management, we are growing more confident about delivering results.

So interim dividend is going to be JPY 40, which is half of JPY 80 full year dividend, which we announced at the beginning of fiscal year. And today, I talked about initiatives for the next stage of growth. But for the next medium-term plan, we will be proceeding with infrastructure advancement and partnership for service deployment. And in the age of AI, we will be aiming to generate corporate value and sustainable growth.

Thank you for your continued support, and thank you for your attention.

[Operator Instructions]

My name is Tokunaga from Daiwa Securities. I have 2 questions. My first question is this, in October and the second half. I would like your comment on the mobile business' competitive environment. NTT is saying that competition is very severe, and they said they had to increase promotional expenses. SoftBank is saying that they are acquiring customers with a focus on quality. It seems that they are taking different approaches views.

Given that how have you competed in October, and net increases in IDs are slowing in terms of growth. So in the second half, how are you going to compete? So may I have your comment on the competitive landscape?

Thank you for your question. As I said in my presentation, we are now robustly promoting structural reform transformation. So ARPU growth and reduction in churns and a positive migration from one brand to the other and increase in bundle rates. I think we're seeing the results, positive results in these aspects. So I think we're having the necessary pieces fall into the right places. .

ID, perhaps some may not be all that robust, but we were anticipating that. So we're trying to increase our health structurally speaking. We want our operation to be mean and lean. That's what we've been doing for the past 6 months. So in that regard, well, it depends on how you look at the competitive landscape, landscape in terms of promotional expenses now that we're having head-on competition with our peers who are pouring promotion expenses. Rather, we would like to compete on the basis of product capabilities that we want to convey the attractions of our -- to our customers to compete in the market, and that will be our approach in the second half as well.

All right. It seems that churn rate is improving. And so will that continue in the second half?

Well, there are some seasonal changes that will appear. But we want customers to use our service over the long term. That will be our focus. So reduction in churn rate and ARPU growth. Those are what we would like to pursue robustly.

So my second question is about the idea behind the midterm plan. I think you talked about capital allocation in one of the pages in the presentation. So a detailed question. Number one, as you review your business portfolio, are you going to look at ROIC, what KPIs are you going to use as a criteria for judgment? And you talk about flexible buyback or shareholder return. Given your makeup, it may be difficult for you to move flexibly. So if you could please comment on these aspects?

Thank you for the question. So capital efficiency, what are the indicators we are discussing that as we speak. Internally, we need to have a discipline set. And by so doing, we will be able to encourage investment for growth in the future. So if you could wait until we come to a conclusion as to which indicators we're going to use for that, that is one message I would like to convey.

And second, being flexible. At this moment, we would like to do what we're doing right now. And upon doing so, we would like to be flexible in deciding on share buyback. It may depend on the definition.

Well, thank you. Flexible share buyback. That is something that we have used as a phrase, not that our stance has changed this fiscal year. already JPY 350 billion buyback and JPY 50 billion purchase altogether, JPY 400 billion of buyback has already been conducted.

And in the second half, we are increasingly confident to meet the EPS target for interim dividend, we are quite confident that we will be able to reach the level that we have said. And for fiscal -- this fiscal year, at this moment, we're not thinking of having any additional buybacks. And for the next year onward, as is noted in the presentation, but based on the growth strategy in the midterm plan, we will conduct share buybacks flexibly, -- it depends on the trends regarding major shareholders and the balance between investment and shareholder return, we would like to remain flexible. Thank you.

The next question. The Section B Road 2, the person in the back.

Masuno from Nomura Securities. So thank you very much for your clear explanation based upon profit. And the first question, the second half profit plan, as for mobile in the first half, 110% increase in the second quarter, JPY 19 billion increase, first quarter, JPY 11 billion increase, so it's an acceleration. But au revision of price and UQ price revision back in November, given that we believe you could deliver bigger. So you put the world over. So I think there is upside.

So on the other hand, your focal areas finance, energy, loss on DX all combined, JPY 16.6 billion increase in profit first half and second half, JPY 30 billion increase. So JPY 13 billion billion increase is needed. So is it possible for you to achieve this?

So where you see growth, so the fee revision and IoT data center, the new business and cost reduction with all those elements, can you deliver results? Or do you need turnaround to be achieved? So how do you view the probability of achievement of second half target?

Thank you for your question. In the second half, JPY 55 billion increase in profit, what is -- we are looking at the composition. So we will -- JPY 30 billion is what we would like to create in focal areas. So finance and energy included. So finance, energy and these businesses -- business segment. So as mentioned, in the first half, so we have identified address challenges. So those businesses have hit that turning point. So we would like to grow those businesses. And with that, we would like to deliver JPY 30 billion. And in addition to that mobile segment, JPY 19 billion and above. So that's the area where we would like to generate profit. So if anything.

So this slide rather than complementing with this, but we would like to grow each business since these focal areas, we would like to grow this business.

My second question is regarding medium-term plan. Regarding capital, basically, the balance sheet optimization and then share buyback and the EPS ambition, so balance sheet and P&L, the balance would be -- good balance would be aimed for, I believe. And what I do not understand is a big theme on the added value and a growing area, what do you mean by them? So going through your presentation, I do not have clear ideas. So what specifically are you thinking about? Could you elaborate?

Thank you for the question. So as of today, for the next medium-term plan. What I would like to do is deliver our message. So on the right-hand side, capital allocation concept, that's what we would like to adopt. And on the left-hand side, so -- we have deployed social infrastructure, including telecommunication infrastructure. So moving forward, data center, AI and such infrastructure. So not infrastructure, but we would like to go beyond that and we would like to deliver the added value as well. This goes for data centers in Japan as well as overseas. So it's a transformation the infrastructure. That's the wording we used, but we we do have the resolution determination and the responsibility regarding the infrastructure. So we'd like to apply that mindset to the AI, but please wait for the announcement and medium-term plan for details.

I do understand the infrastructure, but when it comes to the added value and growing areas. So you are announcing more details when you announced medium-term plan.

Yes.

Next section, Row 2, raise your hand.

My name is Kikuchi from SMBC Nikko Securities. Mobile income increase is really good news, I feel with increase in income from mobile, you will be able to do a lot of things, a lot more things. So I look forward to seeing such new activities. In the past, you said that you will focus on ARPU over the number of IDs. I think that was around 3 years ago when you said that. But if the number of IDs decline, you think that momentum is important mobility needs to be increased. You have to change what you were saying in 6 months' time, which was disappointing.

This time, you use the term transformation. And so I believe that you need to change the KPIs. Otherwise, you will have to start saying something different. If momentum is sluggish, you will have to change your approach. So churn rate is a very important factor, and it was very difficult for us assess what was going on because of the churn rate. So what is it that you are going after? Lifetime value as a time, it's easy to understand, but would that become an indicator, what is the definition? So with these indicators, this is what you're trying to do. If you could clarify that? President Matsuda, what is it that you are looking to achieve. So that's my first question.

Thank you for your question. So increase in income in the mobile business, we are becoming increasingly confident about that because of increasing income there, we will be able to make more investment for growth in other areas. And we're talking about structural reform or transformation, we would like to track what is being substantively changed. So KPIs and sub KPIs will have to be watched, monitored. We have made service revisions, because we have had price revisions, we've had to send a message to customers through DM and electronically. And those customers who have not used our service for long because they were notified decided to cancel, but how many customers are not using data? What is the ratio we have been able to monitor that? And how much data is being used by a same customer over how many months? We're able to grasp the specifics because some customers are utilizing data, they're willing to use our service over the longer term we found.

And so we're looking at such detailed KPS as we continue with our structural reform. Thank you.

If there is a sharp reduction in the number of users, then that could affect you. It's very important. So even if the number of IDs go down, you won't change your approach?

We have no intention of changing our concept or idea -- it's not 1 or 0. It's not that we're not going to pursue the number of IDs. Of course, for future growth, the number of IDs is still important. We want to capture good excellent customers. So those customers who are willing to cancel within the short period of time, that's not the kind of customers we're after. We would like to increase the number of IDs by capturing customers who are here with us for the long term.

My second question, well, you've been talking about growth investment for growth. But the next medium-term plan is going to be formulated in 6 months' time. And so by that time, the number of IDs could further go down. I don't think you can just restrict our discussion in telecom business alone. But according to SoftBank, Crystal intelligence has been aggressively marketed according to their President. NTT is increasing the number of data centers by spending JPY 1 trillion or so. There may be pros and cons with respect to such approaches, but especially your business segment this time, in the current medium-term business plan, it seems that you were not able to successfully strengthen your business segment. So above and beyond building data centers, under the current plan, perhaps you could have done more to reinforce the business segment, Mr. Matsuda. And under the current midterm plan, that's the case. And for the next plan as well, you should look to strengthen the business segment. And there could be various directions. It could be IT services, data centers, solutions, AI. There are various aspects, and you will consider that for the next medium-term plan, but don't you need to identify important areas to start taking measures under the current plan. So Mr. Matsuda, which direction are you heading? If you could just give us a hint or show a direction as to which direction you're heading or trying to head?

Well, the Personal Services segment it is still a large foundation for our business. But in terms of growth, we have to tackle the business segment. We've had double-digit growth. And in the next medium-term business plan, we have no doubt that it will continue to be our growth driver.

So given that, what are we going to do in which area, that's what we have to clarify in the next medium-term plan. As I said earlier, based on the telecom infrastructure that we have, offer value added in telecom business as well as in other businesses, convey that to the customer and service the customers so that we can earn compensation.

So connectivity or telecom and data centers, where AI is being utilized. I think these are pieces that are indispensable to each other. And I don't mean to single our AI business on a stand-alone basis. AI is something that can be incorporated into our existing business as well. So -- we believe that part of our business will transform into one that will embrace AI. And I think AI will accelerate in some areas, but in terms of growth and so forth, how can we incorporate AI to enhance security and what positive impact could it have? That is what we're calculating. And we would like to, of course, increase the odds so that we can be successful in the next medium-term business plan.

Next person, the Section C, Row 3 person in front.

Okumura from Okasan Securities. In the first half, looking at the profit and also I have a question about your thinking about the second half. Page 7 operating income increase is shown in this table from the beginning of the year, roaming and the stakeholder return and they seem to be contributing to the increase in profit, but the stakeholder benefit sharing and roaming. In the second half, do you foresee some special factors regarding them?

So what you said is others portion. Yes, in others. So from our viewpoint, MVNO and Rakuten roaming decrease in revenue and as a stakeholder return benefit sharing. And for this stakeholder portion, it's something that will continue from this year. So what is the portion for this year? We have -- we are not specifying it, but it's a portion that's continuing into next year. And as for our technology partners already some number is incorporated in that sense.

So it's sharing of benefit with the shops and also the personnel expense.

As for the roaming and the stakeholder portion, it's decrease in the profit a bit above JPY 30 billion. It's my understanding wrong?

Not that big. The amount is not that big. So the profit decrease regarding roaming, that's about JPY 1.9 billion. And Rakuten roaming revenue income decrease gradually shrink.

Okay. Understand. So in order to deliver continuously value to customers, a stakeholder benefit sharing cost annually, JPY 20 billion to JPY 30 billion is what we anticipate on a full year basis. And in the first half in that sense, the amount is not so big. It has not incurred so much. And others section has various other elements. So -- for example, positive elements are included as well. So in the second quarter, we had a positive elements contributing.

They are on that basis in the second half, the profit increase and decrease. Page 19 shows the plan for the second half. But what kind of changes were there compared to the beginning of year projection. In the focus areas, JPY 10 billion or so of downward revision was made is the right understanding is, if so, the finance, energy, Lawson business segment, what kind of change happened. And the full year profit plan has been retained. So the others is in balance with the decrease in profit. So roaming and stakeholder benefit sharing cost. So I would like to know the changes in the elements, positives and negatives, regarding that from the initial guidance, the absolute amount has not been changed. So well, we anticipate several factors, we anticipate we have not changed much change, it is need to view -- excuse me. I might be wrong.

The time to close is fast approaching. We will be taking one last question. So Section C Row 1, please.

Tsusaka from Morgan Stanley. Share price, of course, is determined by the market, that's fine. You are performing very well and NTT, who is not performing very well, share price valuation, market assessment, there's not much of a difference between you, KDDI and NTT despite the difference in performance. According to market, price hikes cannot happen every year. You made a price revision this time. You're looking at the situation, looking at the customer reaction, value enhancement, of course, can continue, but it seems that you've already done the price revisions. So in the next step, what is going to be your focus for growth? I don't think the stock market has yet to understand that. For the next phase of growth, you have included a number of slides, but there are rather abstract. So telecom network quality being very good, but that's taken for granted. I'm sure you're focusing on that. But from the user perspective, 99.9%, 99.8%, they won't perceive the difference between the 2. So in that regard [indiscernible]

And I think it will have a tangible absolute effect this year and next year, and we will have a greater source of investment for the future as a result.

And on the right-hand side of one of the slides, capital allocation, I talked about the medium-term business plan and specifics are on the left-hand side. What's going to be the catalyst for the next phase of growth? That was your question.

Not that I'm asking you to wait for the next medium-term business plan to come out, but we're in tumults age with the emergence of AI. And we have a picture for the future, but we're focusing on increasing the odds, if you will, increasing the likelihood of achieving that vision. And you're saying that we should give sneak peaks and I note that we would like to prepare for that for the next phase. Thank you. .

Now it's time to close. So with that, we would like to close the second quarter earnings briefing for the year ending March 2026. Thank you very much for your attendance.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Now we are going to start KDDI's earnings release conference for the second quarter of fiscal year ending March 2026. I'll be serving as the moderator. I am [ Hiraoka ] from Public Relations Department. Today, this earnings release in addition to the venue will be distributed on multiple channels, including YouTube. And the 3 types of documents related to earnings release are uploaded on the website of KDDI. And those who are in the venue, please refer to the handout.

Let me introduce speakers from our end. Representative Director, President, CEO, Hiromichi Matsuda; Director, Senior Managing Executive Officer, CFO, Nanae Saishoji. Director, Managing Executive Officer, CSO and CDO, Tomohiko Katsuki; Executive Officer, Executive Director of Corporate Management Division, Kenji Aketa, so 4 of them. Now President Matsuda, please.

I would like to make a presentation regarding fiscal year ending March 2026 first half financial results. First, let me touch upon this. This is about Osaka, Kansai Expo. The Expo was very successfully concluded on October 13. We presented a joint exhibition on the Future City together with Hitachi Limited, which was visited by approximately 1.9 million people, a large number of people. I believe we were able to offer an opportunity for children to think about the future by facing the challenges for the future. I extend my sincere gratitude to all the visitors and to all those who contributed to the exhibition. Thank you.

Today, I would like to explain about the following 4 points. First, regarding consolidated results. Our consolidated financial results showed increased revenue and profit. We are making progress toward achieving the EPS target as planned. On the left-hand side, operating revenue was JPY 2,963.2 billion, a 3.8% increase year-on-year and 46.8% of the full year forecast. In the middle, operating income was JPY 577.2 billion, up 0.7%, progress rate of 49%. On the right, net income attributable to the owners of the parent the profit for the period was JPY 377.7 billion, up 7.6% with a progress rate of 50.5%.

Second quarter year-over-year growth was strong with operating revenue up 4.1%, operating income up 2.9% and net income up by 18.6%. In terms of topics, I will explain the Q-on-Q situation and the performance in the second quarter. During Q2, we saw the effects of our fee revisions become apparent and achieved a solid growth. Quarterly operating revenue increased 6.3% Q-on-Q and quarterly operating profit increased by 11.8%, and our profit during the quarter grew by 20.7%.

Next, I will explain the factors behind the changes in the consolidated operating income. Each business grew, offsetting the impact of prior year sales promotional expenses. From the left, Mobile in the Personal Services segment increased JPY 11.1 billion year-over-year. Income from Finance and Energy business and Lawson equity method profits combined increased by JPY 12.7 billion. DX increased by JPY 3.9 billion. Technological structural reforms up by JPY 9.6 billion. Impact of prior year's sales promotional expenses were negative JPY 31.2 billion. But in total, income growth was JPY 4.1 billion.

Now these are the key points for consolidated operating income in the second half to achieve full year targets. From the left, mobile business is to accelerate its growth. And with our target to enhance value through service revisions with second half year-on-year growth exceeding approximately JPY 19 billion and over JPY 30 billion growth for the full year. Combining DX with BPO turnaround, we will be putting it on the right trajectory. And in the focus areas, combining DX, Finance, Energy and Lawson equity method profits, we're aiming for an addition of approximately JPY 30 billion. And the negative impact from prior year's sales promotions will end in the first half.

Next, I will discuss our progress in Mobile Structural Transformation. First, let me talk about the virtuous cycle created by the Power to Connect. In the announcement I made in May, I said that we would like to aim at creating a virtuous cycle of growth. I feel that this virtuous cycle is starting to kick in. As shown in the lower left, our company has consistently pursued proactive investments in 5G base stations focused on communication quality as well as collaboration with Starlink. These efforts are now bearing fruit, leading to the creation of KDDI's unique values such as #1 communication quality and tangible connectivity experience, all unique strength of our company. This has enabled us to offer new plans bundling these features.

Furthermore, we're able to pass on the benefits to our partners -- return benefits to our partners through measures such as price adjustments based on these revenue sources and sales channel enhancements. This virtuous cycle is the foundation of our sustainable business growth. We will continue to repeat this cycle to grow together with our partners. For value generated by this virtuous cycle, our Mobile business is undergoing structural reforms focused on lifetime value, LTV. As is on the left, customers see the attractions of our services in terms of its value, the handsets and monthly charges to subscribe to au and UQ mobile. Our focus is to make sure that each brand meets such customer needs so that they will continue to use our offering.

For UQ mobile customers, we would like them to understand the value and the attractions of au and are recommending migrating to au. We've been continuing with this structural reform since 6 months ago. But we will review plans and sales approaches that would induce short-term churn that occur as a result of customers going after incentives only. In the process of such reform, some customers who have not used our service for long may choose to cancel their subscriptions, but we would like to focus on the long term to drive ARPU growth through value creation and reduction in churn by encouraging longer subscriptions so that we can have a leaner business foundation. So the enhancement of our capability to offer connected experience and communication quality form the foundation of value creation. KDDI will build the industry's premier network through #1 communication quality and area coverage.

The left-hand side shows the results of our persistent investment efforts. According to Opensignal's user experience analysis following our February global #1 ranking, we achieved #1 in Japan for third consecutive time last month. On top of that, au Starlink Direct began data communication business in August. And by providing a new value, this business is significantly increasing customers. The number of connections has reached approximately 2.7 million with 76 compatible models and approximately 10 million devices. And as announced today, au Starlink Direct now supports Apple Watch. We have received positive feedback from customers and app development partners as an industry top runner, we will continue to create new value together with all of them.

This expansion of value creation is based on the connected experience. So this 5G Fast Lane has surpassed 800,000 by the end of September and surpassed 1 million users at the end of October. And this offers a smooth connectivity even in peak times and during events. Unlimited Data Overseas on the right, which provides connectivity abroad free of charge for as many as 15 days is received very well by the customers going overseas and people have started to recognize that they no longer need Wi-Fi overseas. And net increases are 2.9 million. Lawson is a partner, and with [indiscernible] idea, we have added a course where members receive 5 free coffee coupons every month.

And as part of earthquake preparedness support, in the event of a magnitude 7 earthquake, we will provide a service within the year that deposits JPY 30,000 into the au PAY balance for bank account customers subscribe to eligible rate plans. This is part of value plan. And on the right, RCS, secure messaging app, with the iPhone update the day before yesterday, you can now use RCS without any prior setup. You can now securely send photos and videos using only a phone number without worrying about the recipient's device or handset.

The effects of structural reforms are beginning to materialize. The initiatives we have explained thus far have borne fruit, leading to growth in Mobile ARPU, which contributes to lifetime value and churn rates are showing an improving trend. On the left, Mobile ARPU reaching JPY 4,460 in Q2, accelerating growth with year-on-year increase of JPY 140. On the right, Smartphone churn rate improved Q-on-Q and Y-on-Y increase also narrowed from 0.17 points in Q1 to 0.12 points in Q2.

As part of further effect of such initiatives, brand switching or migration from UQ mobile to au saw a positive reversal finally in September. This is about switching between brands from UQ Mobile to au. And this positive reversal trend continued into October. This is as a result of making our main brand au more attractive and steadily changing the plans and sales approaches and initiatives to lengthen contracts for UQ Mobile are also bearing fruit. And so improvements in Home Set Discounts as well as handset bundle rates have also been seen substantially at UQ Mobile.

Through the structural transformation focused on lifetime value explained thus far, Mobile revenue on a Personal Service segment basis has significantly surpassed last year's year-on-year growth in the first half, reaching a positive JPY 12.5 billion, accelerating its growth. In the second half, we expect further improvements in churn rate reduction and ARPU growth driven by progress in structural transformation, further improvements in brand mix and expanding contribution from service provisions. The impact of service provisions on Mobile revenue is expected to exceed initial forecast.

Next, I will explain the initiatives to achieve the full year target. We aim for JPY 30 billion scale increase in profit in our focus areas toward achieving the fiscal year March 2026 target. For this, as shown on the right, Energy and Lawson are progressing well, while Finance and DX are recognized as challenges due to changes in the business environment since the beginning of the fiscal year. I will later explain the initiatives for growth for both Finance and DX.

First finance, in the world with interest rate, there is intensifying competition to procure deposit for us. We cannot depend on housing loan. We have to be mindful of loan-to-deposit ratio, and we have to switch our strategy. Individual deposit balance has grown 1.3x and it's steady, but in order to strengthen deposit procurement capability, we have to proceed with our initiatives such as bank, securities alliance. As for credit card, we need to urgently increase membership, especially Gold Card. We would like to attain 1.72 million membership and drive growth further.

Next, business segment performance. In the first half, operating income was up 3.4% year-on-year. It's a somewhat slow result. Mobile, IoT, data center progressed well. On the other hand, BPO business, SI-related business had a temporary profit decrease factors. As a result, we are behind the projection at the beginning of fiscal year. However, we have identified the factor, and we have clear outlook for resolving those factors. So we have addressed the risks. And the first part of those businesses, BPO business, which is about Altius Link, we need to defend our share in existing service, and we need to expand the service domain by using AI, and we are going to realize integration synergy on the right. Various initiatives worked well.

And in September, we increased both revenue and profit. And also as a result of activated sales, the new orders taken increased by 2.8x year-on-year and the number of ongoing projects increased by about 2x year-on-year. And also we are proceeding with a long delayed internal system integration and for cost efficiency improvement, initiatives are progressing by building on this momentum. In the second half of the year, we are completing turnaround and boosting profit greatly.

For growing profit growth in the second half in addition to stable growth of mainstay services, we position expansion of orders for new services as our growth driver. Mobile, IoT and main services in the first half grew by more than 10% year-on-year and driving growth. And in IoT, we started providing our services to connected vehicles of BMW and all of their vehicles produced in North America from July onwards will be equipped with our communication services. On the right, new services will contribute to growth as facility. Our new office in Takanawa, the digital office has received interest of many clients. And by leveraging our know-how in the latter half of the year, we will be steadily completing ongoing projects and Starlink and drone in the area of disaster prevention, inspection security, we are seeing the increase in the permanent and large-scale projects. And in the second half of the year, we will be exploring and growing in the government and municipalities market.

Next, our initiatives for the next stage of growth. Six months have passed since the launch of the new management structure and the construction of our future business foundation is progressing, including the execution of price revisions. Considering this progress, we will discuss the key themes we are focusing on for the next midterm management strategy starting next year. On the left, in the AI era, in addition to transforming infrastructure, including telecommunications into a next-generation model, we will further expand our value-added and growth areas by leveraging digital data and AI. We will enhance the value of communications, security, data centers and other elements that support the AI era and accelerate growth in each business domain through AI-driven efficiency and service deployment.

The second point is on the right-hand side. We believe we are entering a phase where business growth centered on telecommunications is possible. Alongside growth, we will focus on return-based capital allocation and capital efficiency. So we aim to maximize investment capacity by utilizing leverage while being mindful of credit ratings. We plan to direct growth investments with discipline toward areas that can expect high returns in medium to long term. Conversely, for areas that do not meet the criteria, we will consider a review of the business portfolio, including withdrawal.

In conjunction with these ideas, we intend to implement agile share buybacks alongside our commitment to stable dividend increases. By deepening our strength of sustainable growth in the AI era and pursuing quality with an awareness of capital efficiency, we aim to enhance corporate value.

Next, advancement of the network supporting the AI era is progressing towards the construction of next-generation infrastructure. On the left, while needing to respond to massive traffic demand, we are building a comfortable service area with the industry's highest number of Sub6 millimeter-wave base stations also by converting 4G repurposed frequency. So in the fourth quarter, we aim to achieve over 90% population coverage by Q4 of this fiscal year.

On the right, the practical -- I am passionate about this, but millimeter-wave, the other day at Takanawa site together with our partners, we have conducted demonstration of use cases with Netflix and support from JR East. Netflix video, 1 episode of a drama now could be downloaded in 1 second. That's what enabled by millimeter-wave while showcasing that for Sony camera, so 80 consecutive shots or photographs can be uploaded in a second. And as for the data center initiative, that's central to the theme of next-generation infrastructure. The Telehouse in terms of the business-to-business connections, it's #3 globally. And among the carriers, it's #1. So the Telehouse strength is to secure locations close to -- adjacent to urban areas. This resulted in achievements such as high profitability per megawatt and efficient deployment of capital.

Leveraging such expertise, we will construct our sixth data center in London for the AI era with a total construction cost of about JPY 60 billion. London's DC power supply will be enhanced to about 57 megawatts, allowing it to support optimal specifications for real-time processing such as inference AI. And we leverage Telehouse's expertise to quickly establish a data center in Japan. Our Osaka Sakai data center is scheduled to begin operation in January 2026. We will provide sovereign development environment based on AI. And with such infrastructure, we would like to contribute to enhancement of Japan's industrial competitiveness.

On the right-hand side, on the cutting-edge GPU with Google GDC, Google Distributed Cloud, that's going to be utilized by Daiwa Institute of Research. The strategic initiative with Google Cloud is more expensive together with -- so that we can -- AI service that will be created in a manner that's beneficial for both clients and service providers. NotebookLM and Gemini of Google will be utilized as we provide services. But after our announcement of our service scheme, we received various inquiries from many content holding companies. Also KDDI's strength is a combination of real world and technology.

And especially, let me focus on our initiative with Lawson for the purpose of disaster prevention and crime prevention. So we are demonstrating full deployment of AI where AI drone responds to the site in 10 minutes. And on the right-hand side, for Lawson within office, our employees are participating in the demonstration and we have delivered results in crew efficiency improvements such as use frequency data accumulation and one person operations. And also, we are conducting various initiatives such as dynamic pricing and meal support coupon. So based upon what I've explained, we will aim to create the next value creating positive cycle. The investment and partnerships will become our asset that will create value in the future. 5G, 6G and next-generation high-quality network that supports AI era, and we will be strengthening the partnership to create added value service in the future.

And next March, KDDI will be exhibiting at MWC Barcelona 2026. It marks our third consecutive year of exhibition since 2024, which marked our first exhibition, our theme has been Life Transformation. Specific themes or details will be announced at a later date. So stay tuned.

Finally, summary. In mobile, our structural reform mindful of lifetime value worked well. And then on a full year basis, we have outlook of increasing profit by more than JPY 30 billion. For Finance and DX, we've identified challenges and we'll be moving into the phase of executing strategy in the second half. This way, consolidated results in Mobile have progressed in line with our projection at the beginning of fiscal year, and we are growing more confident about delivery of results. So as interim dividend, we would like to pay out JPY 40 per share, which is 50% of JPY 80, which is what we announced at the beginning of the fiscal year. For next stage of growth, we will be proceeding with infrastructure advancement and partnerships for service delivery. In the next round of medium-term plan, we will be aiming to improve corporate value and sustainable growth in the age of AI. Thank you very much for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you very much for waiting. We will now begin the financial results briefing and Q&A of KDDI Corporation for the first quarter of fiscal year ending March 2026. Thank you very much for taking time out of your busy schedule to join us today. I am Miyakawa of IR department and will serve as the moderator today. This briefing will be broadcast live on the Internet with simultaneous Japanese to English interpretation. The presentation will be available on demand on our IR website at a later date. Thank you for your understanding in advance.

Let me introduce the participants today. Kuwahara, Executive Vice President, Representative Director and Executive Director of Business Solutions sector; Saishoji, Senior Managing Executive Officer, Director, CFO and Executive Director of Corporate Sector; Takezawa, Senior Managing Executive Officer, Director and Executive Director of Personal Business sector; Katsuki, Managing Executive Officer, Director, CFO, CEO and Executive Director of Corporate Strategy Planning Division; Yoshimura Senior Managing Executive Officer, CTO and Executive Director of Core Technology Sector; Aketa, Executive Officer and Executive Director of Corporate Management Division.

We have 3 financial results-related materials and TSE timely disclosure material. Total 4 materials are posted on our IR website. Please refer to the disclaimer in the material regarding statements made in these documents, performance targets and projected subscriber numbers explained in the Q&A session today.

Saishoji will first explain the financial results summary, followed by Q&A. Ms. Saishoji, please.

Let me explain our first quarter financial results for the fiscal year ending March 2026. First is our consolidated results. Revenue increased and profit decreased on a consolidated basis, but progress is in line with the initial forecast, top row. Operating revenue was JPY 1.4363 trillion, up 3.4% year-on-year. Middle row, operating income was JPY 272.5 billion, down 1.6%. Bottom row, Profit for the period attributable to owners of the parent was JPY 171.1 billion, down 3.3%.

Next is factors for change in consolidated operating income. From the left, mobile on Personal Services segment basis aims for a year-on-year profit increase of JPY 1.9 billion and our initial forecast of full year profit growth of over JPY 30 billion. Financial and Energy businesses combined were up JPY 6.2 billion. Lawson's equity method profit was up JPY 5.7 billion. DX was up JPY 2.9 billion, technological structural reform was up JPY 3.2 billion and the impact of prior year's promotional expenses, including a JPY 7.3 billion onetime expense was negative JPY 21.4 billion, including others such as returns to shareholders, stakeholders and decrease in Rakuten roaming revenue operating income was down JPY 4.4 billion. However, as mentioned here, our core businesses are progressing steadily, and the impact of sales promotion expenses was factored in at the beginning of the year, so it is in line with our forecast.

In the full year results briefing in May, I touched on 2 points on the left regarding our commitment for the next growth. Digital data and AI will generate new value. So as you see on the right, we will focus on growing our foundational power to connect and making it a strong competitive foundation of KDDI. To achieve this, we will provide the value of connected experience and expand the telecom business foundation, both toC and toB. As the outcome of these business activities, it is important to grow our mobile revenues, which is communications plus value-added services in both Personal and Business Service segments.

To show the progress of our growth to all our supporting stakeholders, we will change and promote our KPI disclosure. The detail on KPI disclosure, please look at the appendix.

This shows the mobile revenue status for Personal and Business Services segments combined. Left side, mobile revenues were JPY 550.6 billion, up JPY 7.6 billion year-on-year. In the center, mobile ARPU was JPY 4,340 up JPY 60. Right side, the number of smartphone subscriptions increased by 450,000.

Personal segment basis, mobile revenues is promoting the communication and added value services. And year-on-year, it is up JPY 2.3 billion. We're making steady progress.

Right side Q1, mobile ARPU and smartphone subscriptions are steadily increasing and new plans offering connected experience value are well received and are off to a good start. Both brand migration and churn rate trends have improved. We expect significant growth in the second half, including the impact of service revisions and we'll continue to aim to achieve a virtuous economic cycle.

The new plans launched in June are off to a good start. On the left-hand side, new value of connected experience, such as au 5G Fast Lane, Starlink Direct and Unlimited Data Overseas have been extremely well received. As a result, about 80% of customers chose the au value-linked plan and Unlimited Data MAX+, which combine reliable unlimited data use with the value of collectivity.

On the right, UQ mobile, due to the increased data usage, but 40% of customers choose Komikomi plan value, which offers the largest capacity. Due to value of connected experience and data demand, high capacity plan is very well accepted. This is the effect of the multi-brand strategy we redesigned along with our service revisions. It has worked as expected with both au and UQ mobile seeing improved trends.

On the left, as au's attractiveness has increased, brand migration trend has improved, and it's flattening is in sight for FY March '26. The number of migrations from UQ mobile to au continues increase, expanding 1.4x year-on-year. We will continue to strengthen efforts to make au more attractive aiming for further growth. The number of migrations from au to UQ mobile decreased significantly in June.

On the right, churn rates have also been positively affected with that of au remaining low and that of UQ mobile showing a significant improvement in June. The trend continues in July as well. Recently, we have seen a trend within the industry toward focusing on contracts with highly engaged customers. We too will transform our structure to the one that is more conscious of lifetime value.

While many companies are focusing on finance, I'd like to reiterate the strength of KDDI's financial services. On the left, KDDI has been a pioneer in creating a synergy model between telecommunications and finance. In the fall of 2025, we will begin collaboration with SBI Securities to strengthen alliance between banking and securities.

In addition to Mitsubishi UFJ e-Smart Securities, SBI Securities will join as a partner for this alliance by using real-time direct debit setup with au Jibun Bank customers would receive preferential interest rate. This will also help us increase our bank deposits. We will continue to expand our collaboration with securities firms in order to strengthen our financial functions together with our partners.

The financial businesses performance and KPIs are progressing smoothly. On the left, au Financial Holdings operating income increased 33% year-on-year to JPY 11.7 billion. On the right, au Money Activity Plan, which has now exceeded cumulative number of subscriptions of 1.6 million, has been successful expanding our customer base, including au PAY Gold Card members.

Next, we will look at the performance of the Business Services segment. On the left, consolidated operating revenue was JPY 349.7 billion, up 4.5% year-on-year, and operating income was JPY 57.5 billion, up 5.4%. For base, revenue grew with growth in mobile revenues and both ID and ARPU were solid, resulting in an increase of JPY 3.9 billion or up 2.5%. In growth area, operating revenue was up 6.2% due to delays in the integration progress at Altius Link to the end of the fiscal year. We aim to expand the growth in focused areas such as security and IoT and to bottom out and accelerate BPO performance.

Finally, today's summary. As to the first quarter consolidated results, despite the decrease in profit compared to the previous fiscal year, progress is in line with our initial forecast. New plans are off to a good start, and the new connected experience value has been well received. A multibrand redesign has been successful, and we continue to aim for a full year profit increase of over JPY 30 billion in mobile in the Personal Services segment. In the Financial Services business, we will strengthen bank/securities alliance and further expand the value we provide by combining telecommunications and finance. In the Business Services segment, we will strengthen initiatives in focus areas and accelerate our growth trend.

That's all. Now we would like to move on to Q&A.

[Operator Instructions] First question is from Daiwa Securities, Tokunaga-san.

This is Tokunaga from Daiwa Securities. I have 2 questions. First, is about the sales promotional expenses. So one reason profit declined is because the sales promotion was big, excluding the one-off basis and all players are having strong results. So this means that you are -- you have this result in the Q1 and this competition will continue on a full year? Or you're not using much expenses now? It's just this past year factor that is impacting your results this time?

Thank you for the question. So I mentioned in the increased decrease of profits, the sales promotion expenses increased, which pushed down the profit. For the one-off factor, JPY 7.3 billion. And for others -- was this spent this year or prior years? I think your question is on that point. So this is Personal Services segment.

Takezawa like to explain? Thank you very much for your question. Takezawa would like to answer.

First of all, as you rightly said, JPY 7.3 billion, is the promotion expense related gain on the reversal of the provision. So that was one-off factor. It will not be incurred from now on. And for the others, so our smartphone Tokusuru program, the program that we offer. This is the expense increase for the past existing customers.

And this Tokusuru program, this started in September 2021, and with the installment receivables, we had the customers who purchased using the installment increased in -- so from the device purchase, 2 years or after 3 years from the purchase, this benefit is executed. And when this benefit is exercised, the residual value portion tends to rise. And that is where we are now.

Going forward, this benefit will end among some customers and the customers who will newly join, will become better balanced. And so the Y-o-Y impact will improve. But for this year, we will gradually improve. So this was factored in at the beginning of the year as we planned for the full year. We will continue our efforts to achieve the target.

So in this quarter, the smartphone subscriptions net addition is slowing down. It's a bit weak, but the expense was not injected in this quarter. And so for the new injections, you are being rather restrictive, suppressive?

Yes, you're right. Well, we're not really restraining, but looking at the profit situation. And right now, we are in the middle of the service revisions. So we will watch the market condition and use our promotional expenses accordingly. For now, on the payment basis, we are not dramatically increasing this year.

And my second question is about mobile revenues. Personal Segment, around JPY 2 billion increase in Q1. On the full year, JPY 30 billion profit increase, I think you said. So profit increase means how much mobile revenue increase are you anticipating for the full year? And I think it's partially due to the revisions -- service revisions. So this will increase as we go through Q2, Q3. So are you in line with the profit increase plan? So the JPY 30 billion full year forecast for mobile revenues.

Thank you for the question. So full year, JPY 30 billion profit increase is the target in the Personal Services segment. Q1 profit increase seems a bit weak. I think that is the gist of your question. So this is again personal business related. So Takezawa will answer.

Thank you for the question. So let me answer. JPY 2.3 billion profit increase. But as you see in the waterfall chart, the profit, JPY 1.9 billion. So the revenue was not converted 100% into profit. There was added value revenue included in the mobile revenues. That's the reason.

So JPY 30 billion profit increase on the profit basis, we need to increase profit by JPY 40 billion. And from August 1, we started our service revisions and some price revisions. And the new pricing plan started in June is now seeing an upside compared to the plan. So we hope we can maintain our momentum until the end of the year and net additions of smartphones need to accelerate. So summer to fall and towards the end of the year, we will try to promote and drive this business and keep the momentum so that we can increase the profit by JPY 40 billion to achieve the JPY 30 billion target.

My follow-up question is, so this revision on August 1, the progress, given that your new pricing is off to a good start. Second, third week, mobile revenue value added. I think this is a good progress. Can I see it that way?

Including the subscriptions, yes, the base telecom revenue will rise and the added value will also be offered to our users accordingly. So the mobile revenues overall can grow, we think.

Next question Masuno-san from Nomura Securities, please.

I have 2 questions. First, about Personal section. Mobile revenue, so 2.5% and the 9.7% increase for Business. So altogether, 1.4% because ARPU plus 1.4%. So as to Personal, 0.5% increase, that's rather limited. So it's not really a real growth. And as to ARPU in the first quarter, maybe not so much growth. Am I right?

So in the simple calculation about the repricing at the 7 months from October, JPY 300. And the JPY 70 million, that's from the smartphone. So the JPY 350 or so, the increase. So from the June in Q, the gross new, the JPY 4 million assumed and over 10x, maybe JPY 8 billion or so. Altogether, the JPY 40 billion or so increase in revenue.

So from the repricing, JPY 40 billion increase, then the Personal section we will see increase in profit. I think that's your plan. As the overall structure, of course, the financial business and Lawson are continuing the positive growth. Am I right to understand that, that is going to be the biggest change for the Personal sector, the current ARPU and the JPY 40 billion increase in revenue because of the repricing. Am I right?

Thank you for your question. For the first quarter, actuals in the first quarter, mobile revenue, ARPU, it's not -- it doesn't look like growing so much. So in order to achieve the initial target of profit -- is it mainly by the impact coming from repricing? That is, I think, the intent of the other question, and Takezawa-san is going to answer your question.

Thank you for the question. Our view is more or less in line with your comment. As I mentioned earlier, ARPU revenue itself in the service revision, some of them are doing very well, but the middle capacity, low-capacity zone with the current service revision as to that zone, we decided to make more focus on the LTV and more engaged users. So the net increase there in that zone is not really satisfactory as the basis for a team. But with this repricing and service revision, within this fiscal year, we would like to make another challenge.

And with that included ARPU -- as to ARPU revenue, as I mentioned earlier, in terms of revenue, about JPY 40 billion and profit JPY 30 billion plus. That's the yardstick in our minds and we would like to take necessary measures going forward as well.

As to Business sector -- Business Services sector, in the first quarter, mobile revenue increased 10% plus JPY 5.3 billion. I think profit came here -- came from here. ARPU grew by about 1%. So in terms of number of business volumes must have been increased a lot. Data center and BPO are not growing really, but the growth area is doing well. So IoT or data center business, BPO excluded, the rest, I think, is must be growing. Other than the area -- other than these 3 highlighted areas, what is really growing? And if it is growing, that's good. But is it contributing to profit. Mobile is doing well and the volume is driving the profit? And in the growth area -- other areas, my intent is to know more about the other area.

As to business-related revenue, well, the mobile revenue is increasing, but data center, BPO are not really growing. So what about the rest of the business? What is growing? What is the current status of growth area? That was the question. So Kuwahara-san answers your question.

Thank you for the question. The base growth separately, starting with base, mobile is performing very well. ID, ARPU and mobile value-added services are positively affecting to produce profit.

And as to growth side, the good news and bad news, starting with the good ones. There's something which is not shown here. Our new focus, namely Cybersecurity and Facility Solutions was Starlink drawn. They are growing very steadily. Meanwhile, digital BPO is not doing so well, year-on-year, was revenue and profit decreased. So the turnaround there will be a key point. As to data center, it's somewhat weakening. But in the first quarter last year had some one-off factor and also FX impact as well. And that is why it is a bit weaker. But on a full year basis, the profit is expected to grow by double digit.

Digital BPO, the situation remained the same from the last year. And in the past, you said that on the customer side, the size of orders was decreasing you said in the past? That trend continues. Could you please elaborate on the background?

Digital BPO, here is what we are doing as to existing customers, that we are digitalizing in those customer bases. That means that the revenue decreases to some extent. And to set it off, we are going to acquire new customers so that the ultimate results will be positive. So from the last year, the progress is kind of slow. But comparing last year and this year, the number of transactions increased 1.6x. So in the second half of the year, we will see some positive growth and results.

[Operator Instructions] So Okasan Securities, Okumura-san.

I'm Okumura from Okasan Securities. I have 2 questions. First is on the new pricing plan. Since it was introduced, how is the competitive landscape? You mentioned that you are doing good. And in the short term perspective, since June 3, since the plan was introduced, smartphone subscription has been positive. How is MNP moving?

And in addition to that, which brand, which attribute customers are changing or showing some changes? You mentioned what is happening in the brand. But vis-a-vis competitors, how have you seen any changes in the competitive landscape?

Thank you for the question. So after the new pricing plan was introduced, how the competition changed, subscriptions, MNP, brand and vis-a-vis competitors. This is Personal Services sector, so Takezawa will explain. Thank you for the question. So Takezawa will answer your question.

First, on June 3, the new pricing plan started in au Value Link Plan. As mentioned in the presentation about 80% of au users joined this. And the UQ side, Komikomi value and Tokutoku plan 2, 2 new pricing plans are launched. Komikomi value 40% have joined. So we are seeing an upside compared to our plan.

But on the other hand, vis-a-vis competitors, the mid-volume and above, we are fully competitive. But in UQ, the low-volume area, we have many, many plans. We closed the new applications for this lowest bracket. So it's not so much churn.

In terms of acquisition, we're seeing an impact. And for this part, Tokutoku plan 2 appeal product attractiveness is being pursued. So how we compete in the low-volume area is the key. Smartphone net addition is not strong enough, as mentioned earlier. So we are trying to come up with the comprehensive measures to address this.

First, starting today, some new pricing plan was introduced. So this new pricing plan that is off to a good start, will be used to compete effectively with our competitors.

So compared to April and May, June smartphone subscriptions on MNP has settled somewhat?

Yes, churn in June was settled, stabilized compared to April and May. But in terms of acquisitions, we were a bit behind. So the key is how we reinforce that part.

My second question is on Business Services segment. So this may be repetitive. But in growth domain, excluding LAC consolidation, the actual real-term profit is down? So you're struggling with digital BPO, but you are expecting positives in the second half. As you've been explaining from the past, what is the probability of the growth accelerating in the second half?

So in growth area, excluding LAC, it seems that it is negative growth. So you want to know the probability of the growth in the second half. So Kuwahara will answer your question.

Thank you for the question. First, what we do in the second half. In our plan, looking at first and second half, as every year, we are second half heavy, especially fourth quarter. The one-off money so the seasonality-wise, we have a ramp-up in the fourth quarter. For example, mobile smartphone, IoT, the monthly revenue is progressing steadily. So the remainder is the temporary factor. So excluding security, we look at security together. So the security is contributing to positive, and we think we can continue growing security. I hope this answers your question.

Thank you. Just 1 follow-up question on the Business Services segment. So the corporate mobile price revision. What is your thinking plan or progress? Anything you could share with us?

So on the corporate side, we have revised our plan. New pricing plan has been introduced. But on the corporate side, we have a one-on-one bilateral contract with companies. So the number of connections, subscriptions, we discuss with customers and revised accordingly. Starlink Direct or remote, Zoom that companies use or Teams. The additional -- we have a plan where we add the GIGA. So this is highly welcomed by corporates. So this is a bilateral negotiation and contract. So we negotiate and revised accordingly.

[Operator Instructions] Tsusaka-san from Morgan Stanley MUFG Securities.

Here, Tsusaka. I have 1 question. The net increase of smartphone subscriptions quarter-on-quarter, that was extremely small growth. By changing prices in market, it said that the other is because of the repricing and the churn rate has rising up. And in August, there's the other price hike for the existing plans. Some users understand it, but other users don't. The quarter starting in September, maybe you cannot expect a lot for the net increase for this fiscal year. In the Personal area, mobile revenue and the design and structure, not the number of users, but the migration to large capacity plans, is that your focus? So in June, that net increase was very small and the churn rate going up and with other rate hike in August, maybe could be an additional risk? What is your thought?

Thank you for your summary. So Takezawa-san answers your question.

Thank you for the question. As you mentioned, this net increase level, other small changes in the market and some changes in our account measures vis-a-vis customers because of these changes and that we need to wait for those changes to pay off to be effective. So we did make some other pricing change and other changes that we announced in May, what will be the timing for them and to what extent. And of course, we will watch closely market conditions to make decisions in that area. When the right time comes, we would like to talk about it to you.

As to the overall structure, here is our thought. There are customers who could change the carriers or the plans that -- it is very good thing for us to have customers who are very loyal to us, but we are afraid of the engagement with customers becoming weaker and that would have some impact on churn rate as well.

So as we announced at the beginning of the fiscal year, and we started this new Value Link Plan from June and also for UQ, Tokutoku 2 and Komikomi value, centering around those other programs or plans, we would like to make advancements.

As to the competitiveness or competitive edge for low capacity side, how should we think about it? Well, some countermeasures included, we are thinking about how to maintain or recover our momentum in the competition. I think it is quite possible that we move on to that direction. In any case, we are going to watch closely the market to make the next move.

I'm sorry, could you please make some follow-ups. The ARPU revenue or mobile revenue increased, that comes mainly from the repricing of existing customers. But once the first round is completed, beyond that, the plan change only that will bring about the ARPU increase. If that's the case, then your organic pricing change is good. But I think the number of subscriptions contracts is also important and also pricing -- prices for the plan. What will be the good balance? Once this pricing that has completed its the other course, then what will be your next step?

Well, basically, revenue ID times ARPU, that is for telecommunication, that remains unchanged. And for ARPU, we have been working on ARPU. And we have accumulated to some extent. At this time, in addition, along with the provision of values, we also changed prices. And as you pointed out, the remainder -- remaining element is the number of customers. And I think I have been saying this repeatedly, we are looking at ID as an important element as well because that would lead to more revenue. ID times ARPU, and we need to maximize the result of that calculation in that way, we need to operate our business.

Thank you, Takezawa-san. So it is exactly time. We will close KDDI's first quarter briefing of fiscal year ending March 2026. Thank you very much for your attendance.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

We will now begin the financial results briefing of KDDI Corporation for the first quarter of fiscal year ending March 2026.

I am [ Hiraoka ] of Public Relations department and will serve as the moderator today. This briefing will be held in this venue and also broadcast live on YouTube and other media. Three financial results related to materials and one timely disclosure material are posted on our IR website. For the attendees in the venue, please check your handout.

Let me introduce the participants today: Hiromichi Matsuda, President, Representative Director and CEO; Nanae Saishoji, Senior Managing Executive Officer, Director, CFO; Tomohiko Katsuki, Managing Executive Officer, Director, CSO and CDO; Kenji Aketa, Executive Officer and Executive Director of Corporate Management Division. So we have 4 participants.

President, Matsuda, please.

Let me explain our first quarter financial results for the fiscal year ending March 2026. First is our consolidated results. Revenue increased and profit decreased on a consolidated basis, but progress is in line with the initial forecast. Top row, operating revenue was JPY 1,436 billion, up 3.4% year-on-year. Middle row, operating income was JPY 272.5 billion, down 1.6%. Bottom row, profit for the period attributable to owners of the parent was JPY 171.1 billion, down 3.3%.

Next is factors for change in consolidated operating income. Although profit decreased due to onetime factors, growth in core business is leading to steady progress against the initial forecast. From the left, Mobile on Personal Services segment basis, aims for a year-on-year profit increase of JPY 1.9 billion and our initial forecast of full year profit growth of over JPY 30 billion.

Financial and Energy businesses combined were up JPY 6.2 billion. Lawson's equity method profit was up JPY 5.7 billion. DX was up JPY 2.9 billion. Technological structural reform was up JPY 3.2 billion, and the impact of prior year's promotional expenses, including a JPY 7.3 billion one-time expense was negative JPY 21.4 billion, including Others such as return to stakeholders and decrease in Rakuten roaming revenue, operating income was down JPY 4.4 billion. However, as mentioned here, our core businesses are progressing steadily and the impact of sales promotion expenses was factored in at the beginning of the year, so it is in line with our forecast.

In the full year results briefing in May, I touched on 2 points on the left regarding our commitment for the next growth. As shown on the right, in order to create new value through digital data and AI, we will focus on growing our foundational power to connect and make it strong competitive foundation of KDDI. To achieve this, we will provide the value of connected experience and expand the telecom business foundation, both toC and toB. As the outcome of these business activities, it is important to grow our mobile revenues, which is communications plus value-added services in both Personal and Business Services segments.

To show the progress of our growth to all our supporting stakeholders, we will change and promote our KPI disclosure. This shows the mobile revenues status for Personal and Business Services segments combined. Left side, mobile revenues were JPY 550.6 billion, up JPY 7.6 billion year-on-year. In the center, mobile ARPU was JPY 4,340, up JPY 60. Right side, the number of smartphone subscriptions increased by 450,000. We are committed to enhancing the power to connect and aim to further grow our mobile revenues.

Mobile revenues in Personal Services segment grew steadily, up JPY 2.3 billion year-on-year, by promoting initiatives of communications and value added. Right side, in Q1, Mobile ARPU and smartphone subscriptions are steadily increasing, and new plans offering Connected Experience value are well received and are off to a good start, which I will elaborate later. Both brand migration and churn rate trends have improved. We think this is a good sign.

We expect significant growth in the second half, including the impact of service revisions, and we'll continue to aim to achieve a virtuous economic cycle. The new plans launched in June are off to a good start. Left side, new value of Connected Experience, such as au 5G Fast Lane, au Starlink Direct and au Unlimited Data Overseas is very well received. As a result, about 80% of users chose au Value Link Plan and Unlimited Data MAX-plus that bundle worry-free, unlimited data use and the value of connected experience.

To further promote the appeal of experiential value, a TV commercial was launched today featuring Mr. Takao Osawa as the King of invincibility. Right side, about 40% of users chose Komikomi plan value with the largest data capacity due to increased data usage. Driven by the value of connected experience and increasing data demand, our reliable large capacity plans are highly popular.

Next is on KDDI's strengths, 5G network. KDDI is enhancing our competitiveness further by also achieving #1 rating in 5G SA stand-alone, which is the true value of 5G service. Left side, we will exert our competitive edge as we move toward the full deployment of 5G SA. Top row, 5G SA is available at all 41,000 Sub6 base stations, the largest number in Japan, making us area #1. In Opensignal's 5G SA network experience analysis in Japan released yesterday, we achieved #1 in all 6 categories.

Furthermore, we began operating Sub6 base stations compatible with 2 frequency bands. Simultaneous deployment of 2 frequency bands can double the installation efficiency and communication speed. Right side, au 5G Fast Lane, which offers the #1 rated 5G SA communication quality was launched in July. Smooth communication during peak hours is well received.

Measurements after the service launch in July showed that communication speed on Yamanote Line was about 1.9x faster than normal. Although applications are required. It is being used by many people at a fairly rapid speed. Furthermore, au Starlink Direct and au Unlimited Data Overseas connect in out-of-service areas and overseas to support customers' daily lives and sense of security.

Au Starlink Direct is highly rated for reliable connectivity at sea and in the mountains. We will also further enhance features that support the sense of security. From the end of July on Android device, the video receiving and sending is also possible. Data communication will start this summer. 66 models and over 9 million devices have become compatible with the service, covering 1 million unique users, just 3 months from launch.

Right side, au Unlimited Data Overseas is well received for our competitive pricing, convenience and communication quality. The pricing benefits are particularly compelling with about 60% of users who used this service in June subscribing to the bundled communication plan. This will help Japanese people travel abroad easily and hassle-free without the need for a Wi-Fi router. This is the impact of multi-brand strategy that was redesigned along with service revisions. It worked as expected with trends improving for both au and UQ mobile.

Left side, trends improved by enhancing the attractiveness of au and by widening the value gap with UQ mobile. Therefore, flattening brand migration is in sight for FY March '26. The number of users migrating from UQ mobile to au continues to increase, growing at 1.4x year-on-year. We will continue to promote the attractiveness of au and aim for further growth. The number of users migrating from au to UQ mobile also dropped significantly in June because it is also available overseas.

Right side, churn rate is showing similar effect with au maintaining a low level and UQ mobile improving significantly in June. The same trend continues in July. Recently, the industry has been working hard to encourage long-term usage rather than short-term cancellations. We will also redesign our structure to focus more on lifetime value.

Next is Ponta Pass. As a contribution to KDDI's growth and contribution to Lawson's growth starting June, we have been promoting the attractiveness of Ponta Pass. And from June 17, we started in-store membership registration at Lawson, which is very simple, and about 80% of new memberships are non-au ID users from other companies. Through these initiatives, we aim to achieve a net increase of 1 million members for the full year.

Next is financial services. While many companies are focusing on finance, let me reiterate the strength of KDDI's financial services. Left side, we launched au Jibun Bank in 2008 and established au Financial Group, a holding company in 2019 to refine and make our financial services more attractive.

In 2023, we released au Money Activity Plan, the industry's first bundled plan with telecom and have pioneered a synergy model between telecom and finance ahead of our competitors. We are currently building a foundation to provide a variety of convenient financial services to our customers.

In fall 2025, we will begin collaborating with SBI Securities to strengthen our bank and security alliance as shown on the right. SBI Securities has been added as a partner of the service in addition to the existing Mitsubishi UFJ eSmart Securities. By using real-time direct debit with au Jibun Bank for investment, you can receive preferential interest rates. This will also help us increase our bank deposits. We will continue to further expand our alliance with security firms to strengthen our financial functions with our partners.

The financial businesses performance and KPIs are progressing smoothly. As you can see here, au Financial Holdings' operating income increased 33% year-on-year to JPY 11.7 billion. On the right, au Money Activity Plan, which has now reached a cumulative total of 1.6 million subscribers has expanded our customer base, including au PAY Gold card members, which now is JPY 1.61 million.

Moving on to the performance of Business Services segment. We would like to strengthen our efforts in the focus area towards the second half of the year and accelerate our growth trend. The left side, consolidated operating revenue was JPY 349.7 billion, up 4.5% year-on-year, and operating income was JPY 57.5 billion, up 5.4%. The base portion up 2.5% or JPY 3.9 billion increase in revenue and the area of growth. This is due to the delays in the integration of Altius Link or the Digital BPO project progress slowdown. The growth of this area was 6.2%.

Toward the end of the fiscal year, we would like to make a catch-up or acceleration. In the growth area, we will focus on the high-demand cyber security and IoT for further growth. On the left, security will demonstrate synergy with networks if it is inseparable. And the JSOC, the one of Japan's largest security monitoring centers, LAC, the KDDI, the leverage, the other strengths of LAC as well to secure large orders. Actually, we received large orders in 2025. In July, full scale global rollout began to further expand our global business.

On the right, IoT-related services, year-on-year, 19.5% and the 5, 320 -- actually 5.320 million (sic) [ 53.20 million ], the connections were achieved. Our partner line, SORACOM, that they have real world platform -- AI platform was declared and that we're fully in agreement with their move. And for the ConnectIN for PCs has now been supported by over 30 models, and the GIGA schools are using it in several local governments and also at the personal PCs.

Now, I would like to explain our initiatives for the next stage of growth. It is because we have digital data that we can accelerate DX penetration among Japanese companies and customers, leveraging a stronger AI. To achieve this, fundamental infrastructure for the AI era will become an important value for telecommunications carriers.

On the right, in the AI era, here, it says AI era infrastructure. Traffic volume is expected to increase dramatically and also to utilize various data. The information, various data, including sensitive information such as personal information, data centers need to safely and seamlessly store such data. And the KDDI has, as you can see, a key position to own this next-generation network in domestic AI data center, and we will continue to develop them.

So we are promoting efforts to build next-generation networks for the AI or AI era. We have a new partner here, AMD, CPU -- for CPU and GPU and also DriveNets in Israel. We have alliance with these entities as well. On the right-hand side, toward an AI for Network, we will work on instant recovery and network management using AI as part of the study, how to use AI for AI-based incident recovery. We have begun developing a function to identify the cause of an incident. And we have successfully completed via the study for the natural language level analysis.

As to AI Data Center, with Japanese companies and customers, we create secure and reliable AI environment for them. Left-hand side, we will build a domestic GP infrastructure in major cities where data is concerned -- concentrated. The Osaka Sakai AI Data Center is going to use the Hewlett Packard's advanced cooling technology. And in Tama, the Telehouse Tokyo Tama 5-2nd is going to open in the fall of 2027.

Such AI data center, based on GPU platform and AI services that run on a domestic GPU platform, will be developed, so called the Sovereign Cloud. So the sovereign of data -- the sovereign of the operation, data operation is very important. We have this data sovereign cloud services with Google Cloud and iret allowing data to be securely stored and utilized. We made that announcement.

In addition, we plan to offer Gemini on the GPU platform at the Osaka Sakai AI Data Center. We are also working on developing AI services that will be deployed on this robust AI infrastructure. Left-hand side, it's about ELYZA. ELYZA has developed a medical domain-specific LLM that surpasses global standards and an inference model comparable to open AI's o1-mini.

As to AI agent, we started the Real x Tech LAWSON. For example, they are the other customer service new robots or the support, the agent. We are accumulating know-how right now. And we have also launched Real x Tech LAWSON at our new Takanawa headquarters, where we will put these initiatives into practice on site. On the left-hand side and right-hand side, the store 1 and 2 examples are shown here. In June, we opened this at a new convenience store for the remote customer services. More than 100 customers used them in one month and of which 30 went into a contract and especially the online consultations or medical instructions are very well received.

On the right-hand side, it's about the LAWSON, especially developed for office environment. Here, you don't need to wait for register. Using smartphone, the register, and the average stay period is only 2 minutes. And also, the robots are selling the products of LAWSON to 60 to 80 customers or employees. They are buying products from those robots every day with daily sales of around JPY 20,000, so those robots are very excellent sales staff for LAWSON.

At Takanawa Sandbox for the Future, we will create value by combining digital data and AI through a variety of initiatives, including digital aid represented by AI agents and physical AI such as robots. As you can see on the right-hand side, this whole town has an OS for digital twin by carving out part of this community that can be deployed into other area or community or city. So that is what we would like to achieve with Takanawa model.

Now, we are going good to have you understand better the initiatives that we are going to have, the one of the largest business events of KDDI Group, KDDI Summit in 2025 on October 28 and 29. And the event will be held at Takanawa Gateway Convention Center in Takanawa, Tokyo. It will also be viewed online. We will welcome a diverse group of guests and business partners to present the latest case studies, leveraging our strength, power to connect.

Lastly, today's summary. Consolidated results for Q1 were in line with our initial forecast despite a decline in profit compared to the previous fiscal year. New plans are off to a stronger start, and the new connected experience value has been very well received. The multi-brand redesign has also been successful, and we continue to aim for a full year profit increase of over JPY 30 billion with mobile in the Personal Services segment.

In the Financial Services business, we will strengthen the bank securities alliance. And this time, we are going to have such alliance with SBI Securities. In the Business Services segment, our expectation is not satisfied yet, not completely, but we will strengthen initiatives in focus areas and accelerate our growth. As initiatives for the next growth, we are making progress in building the foundational infrastructure to accelerate the adoption of this transformation among the Japanese companies and the customers, and we are going to make this new initiative in Takanawa successful and then deploy it to nationwide, roll out to nationwide. We are going to focus on those areas.

And thank you very much for your continued support. Thank you for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]