KDDI Corporation (Ticker: KDDIY (OTC:KDDIY)), a leading telecommunications company, has reported a positive performance in its first half financial results for the fiscal year ending March 2025. CEO Makoto Takahashi highlighted a 2.8% increase in operating revenue to JPY 2,855.7 billion, and a 2.3% rise in operating income to JPY 573.1 billion.
The company has made significant strides in its business services and digital transformation efforts, contributing to its financial growth. KDDI also announced strategic initiatives including a stock split, share repurchase plan, and investments in AI and retail technology, aiming to attract new investors and showcase its innovations at the upcoming MWC Barcelona 2025.
Key Takeaways
- KDDI reported a year-on-year increase in operating revenue by 2.8% and operating income by 2.3%.
- The company is on track to achieve its EPS targets by March 2026.
- Growth was driven by higher communications ARPU, stable smartphone subscriptions, and double-digit growth in the Business Services segment.
- KDDI announced a two-for-one stock split and a share repurchase plan totaling JPY 400 billion.
- Strategic initiatives focus on digital transformation, AI infrastructure, and enhancing customer experience in retail.
Company Outlook
- KDDI aims to reach its EPS targets by March 2026, focusing on ARPU revenues, drones, and collaborations with Lawson.
- The company is enhancing its 5G network and introducing competitive pricing plans to maintain market competitiveness.
- KDDI is investing in AI infrastructure, with plans to build a large-scale AI data center and establish edge infrastructure across Japan.
Bearish Highlights
- The company did not highlight any specific challenges or setbacks in the earnings call.
Bullish Highlights
- KDDI experienced steady increases in communications ARPU and double-digit growth in the DX and Business Services segments.
- The company is seeing a significant rise in young professionals in management roles and a tenfold increase in mid-career recruitment.
Misses
- There were no specific financial misses reported in the earnings call.
Q&A Highlights
- KDDI supports ongoing discussions on updates to the NTT Law, emphasizing the need for modernization while maintaining the current framework.
- The company's strategic initiatives were reiterated, including construction of AI data centers and the Real x Tech Lawson store trials.
KDDI's focus on digital transformation and human resource development is evident in its operational performance and strategic plans. The company's efforts in enhancing its 5G network, launching competitive pricing plans, and investing in AI infrastructure are expected to contribute to its long-term growth. KDDI's participation in MWC Barcelona 2025 will provide an opportunity to showcase its advancements in communications and retail technology. With the announcement of the stock split and share repurchase plan, KDDI is positioning itself to attract new investors and continue its trajectory of sustainable growth.
InvestingPro Insights
KDDI Corporation's (Ticker: KDDIY) positive financial performance, as reported in its first half results, is further supported by data from InvestingPro. The company's market capitalization stands at an impressive $62.7 billion USD, reflecting its strong position in the telecommunications industry.
InvestingPro data shows that KDDI has a P/E ratio of 15.88, which is relatively moderate for the sector, suggesting that the stock may be reasonably valued given its earnings. This aligns with the company's reported growth in operating revenue and income.
One of the InvestingPro Tips highlights that KDDI has maintained dividend payments for 31 consecutive years. This remarkable track record of consistent dividends underscores the company's financial stability and commitment to shareholder returns, which is likely to be attractive to investors seeking steady income.
Another relevant InvestingPro Tip indicates that KDDI is trading near its 52-week high. This information, coupled with the company's recent announcement of a stock split and share repurchase plan, suggests that investor confidence in KDDI remains strong.
The company's profitability over the last twelve months, as noted in another InvestingPro Tip, aligns with the positive financial results reported in the earnings call. This consistent profitability supports KDDI's ability to invest in strategic initiatives such as AI infrastructure and digital transformation.
For investors seeking a deeper understanding of KDDI's financial health and market position, InvestingPro offers additional insights. The platform provides 9 more tips for KDDI, which could offer valuable perspectives on the company's valuation, industry standing, and financial management.
Full transcript - KDDI Corp (KDDIF (OTC:KDDIF)) Q1 2025:
Unidentified Company Representative: We will now begin KDDI Corporation's First Half Financial Results meeting for the fiscal year ending March 2025. I'm [Nakoji] (ph) from KDDI's Public Relations. I will be your moderator today. Thank you. Today's Financial results meeting will be broadcast at the venue, as well as via multiple channels, including YouTube. In addition to today's materials, three financial results, related documents and TSC disclosure materials, three items have been posted on the KDDI website. We'd appreciate if you could take a look at them. Those of you at the venue, refer to the materials in front of you. Let me introduce today's participants. President, Representative Director, CEO, Makoto Takahashi; Managing Executive Officer, Director, CFO, Executive Director Corporate Sector, Nanae Saishoji; Executive Officer, Executive Director, Corporate Management Division Corporate Sector, Kenji Aketa; General Manager Accounting Department, Shigeru Ezoe. There are four of us. Mr. Takahashi, the floor is yours.
Makoto Takahashi: Thank you for having me. Let me share with you the results of the first-half of the fiscal year ending in March 2025. I'd like to focus on the following four points as you can see. First, on consolidated financial results. Both revenues and income increased in the first-half of the year ending in March 2025. The left shows the operating revenue, which was JPY2,855.7 billion, up 2.8% year-on-year with a progress ratio of 49.5% against the full-year forecast. If you look at the center, operating income was JPY573.1 billion, up 2.3% year-on-year with a good progress ratio of 51.6% against the full-year forecast. The key points of the first-half performance are communications ARPU revenues continued to increase building on the first quarter. DX, Business Services segment operating income had double-digit growth. Financial and energy businesses achieved an increase in income. All on track to meet our full year forecasts. Next, let me share with you factors for change in the consolidated operating income. Communications ARPU revenues and major businesses such as DX enjoyed steady growth. From the left, Group MVNO revenues and Rakuten roaming revenue was minus JPY11.2 billion year-on-year. Multi-brand communications ARPU revenues were plus JPY4.6 billion. Financial business and energy business combined were plus JPY11.4 billion. Lawson income with equity method was plus JPY9.8 billion. DX business services segment were, up JPY11.4 billion. While there was an increase in technology and sales promotion costs, operating income was up JPY12.8 billion. Next on pathway towards mid-term growth. To achieve EPS target by the end -- the year ending in March 2026 by promoting satellite growth strategy, we aim to grow major businesses and new business areas. In addition to increasing profits in major businesses such as ARPU revenues and focus areas such as DX, Drones, Lawson and Starlink, we will also enhance efficiency in technology cost. Next on Personal Services segment. First, regarding ARPU revenues. The left shows total ARPU revenues, which are growing both in communications and value-added. The right shows communications up by brand for au about 3% increase year-on-year. For UQ Mobile is about 7% growth year-on-year. As for migration from UQ to au, it has almost doubled year-on-year. It's steady and brand mix is also improving. Next, regarding smartphone subscriptions and the au churn rate, please look at the left. Smartphone subscriptions contributing to ARPU revenue growth continued to increase steadily. Moving to the right, our main brand au's churn rate decreased every quarter, meaning we have a firm grip on core customers. To maximize, total ARPU revenues, we are promoting initiatives for expanding customer base and creating added value. Please look at the left. Our growth strategy in personal services is to create added values based on contact points of communications customers aiming to increase revenues and retention. Moving to the right to boost the strategy, we made an announcement of number one network for connected experience and competitive pricing plans with a full scale launch of collaboration with Lawson. Towards strengthening momentum, we are promoting KDDI's strength with multi-brand strategy and high quality network. au offers value-added services such as Money Activity plan. UQ mobile offer affordable pricing plans. povo give new experiential value with partners. We are strengthening multi-brand strategy meeting all kinds of needs. And supporting this, we have number one network for connected experience driving our competitive edge. It's high quality network that supports multi-brands. We expanded high speed, high quality 5G, achieved number one in quality of experience. The left shows our 5G network, which is built with repurposed 4G frequency topped with Sub6 focusing on quality of experience. Leveraging the industry's largest numbers of 5G Sub6 base stations, we have optimized our coverage. As a result, the right shows that we have achieved the number one position in 13 out of 18 categories in Opensignal's user experience ratings including the reliability experience among the four major domestic MNOs. To continue to be chosen by our customers, we are strengthening network even further. Please look at the left. By leveraging massive MIMO technology that supports two Sub6 frequencies in close proximity, which is our strength and carrier aggregation, we will provide even more comfortable and high speed 5G communications. On the right-hand side, we are working to connect all kinds of scenes. Last month, we successfully conducted a field test of direct communications between satellites and smartphones using Starlink. We are currently preparing for service launch by the end of the year. We will continue to expand the communications quality and coverage area with our unique initiatives. On top of the network, we've revamped our pricing plans to offer no less competitive options than peers. First, with UQ Mobile and povo, we offer competitive new plans and new experience. Please look at the left, UQ Mobile offers a new plan that provides an additional 3 gigabytes on top of the existing data capacity at no extra cost. Center, povo 2.0 offers a new topping that allows you to use 360 gigabytes in a year. When combined with discounts, you can enjoy 30 gigabytes for as low as JPY1,980 per month. This is a very strong plan. About new experience, we will launch povo Data Oasis within this year with a new experience of a giga charge when you visit Lawson. This is a new experience. We aim to make our service a subline option for users of all carriers. We will promote attractiveness of au by communications plus value-added and improve customer retention further. Subscribers of au Money Activity plan exceeded 1 million. We achieved number one position in J.D. Power's customer satisfaction surveys being received very warmly. We are now adding convenience stores in addition to packaged services of fixed line energy, finance and settlement. The convenience store is now included. We will make au even more attractive. And thanks to synergy with communications, customer base for value-added areas has been expanding steadily. The left shows the number of au Jibun Bank savings account, which was up 940,000 year-on-year. au PAY Gold card members increased to 410,000. The right shows au Denki, au electricity subscription which was up 30,000 year-on-year. Next is about collaboration with Lawson. The left shows the start of the new management structure with Mitsubishi and KDDI having 50% each with Real x Tech Convenience, Real x Tech Convenience, Ponta economic zone expansion and social impact resolution. We aim to realize the growth of Lawson and KDDI. Please look at the right. In Real x Tech Convenience, we will work on new convenience store experience on DX by utilizing data and AI. In addition to increasing daily sales by customer referrals, we will reduce store operation by 30% to support Lawson's growth. This shows our initiative to improve customer experience value in collaboration with Lawson. On the left, au Smart Pass Premium was rebranded as Ponta Pass on October 2 with an expanded range of discount coupons that can be used at Lawson. In the first two weeks, number of daily active users increased by about 1.5 times, which is a very strong start. We are aiming to reach 20 million members in order to expand the Ponta Economic Zone. On the right, we will also use Lawson shops to increase opportunities to propose communication and value-added services. Through these initiatives, we aim to increase KDDI's growth by increasing total ARPU revenues and strengthening retention. Finally, with convenience stores as social infrastructure and the power of Real x Tech, we will contribute to solving social issues such as maintaining local public services and disaster prevention with the aim of creating social impact. We will strengthen our cooperation with local communities to solve issues. As shown on the right, we signed a comprehensive agreement with Ishikawa prefecture last month. Lawson stores will be deployed as multi-hubs with digital technology so that they can serve as local disaster prevention bases such as by deploying drone ports and Starlink and using drones in emergencies to check the disaster situation and search for rescuers. Next is on Business Services segment. Left side, operating revenue in the first half was JPY672.4 billion with a steady increase of 13.1% year-on-year. The growth area, in particular, is driving growth, which is up by 29.5% year-on-year. Right side, operating income was JPY113.7 billion, up 11.1% year-on-year, making steady progress towards double-digit growth for the full-year. The drivers of this growth are highly profitable businesses such as IoT and data centers. IoT related services on the left are targeting sales of JPY200 billion in FY March '26. Operating revenue in the first half of FY March '25 was JPY79 billion, up 21.5% year-on-year showing steady expansion. IoT connections which formed the basis for business expansion grew significantly to46.33 million as of the end of September 2024. Right side, data center operating revenue was JPY65 billion, up by 12.1% year-on-year. We will continue to expand our services to meet the growing global demand for generative AI. Next is WAKON-CROSS, a business platform for the AI era. AI will be implemented in all functions of the platform to solve various industry issues. We will accelerate our customers DX by using AI to solve various industry problems such as mobility, retail and logistics. In the mobility area, we aim to support mobility society where communications and AI are integrated. In the future, AI is expected to be integrated into all types of mobility, including cars, drones and robots and to evolve into a more convenient existence for customers. We will use AI to automate and sophisticate our strength in managed services, including operations and monitoring that we have gained in our global connected car business. In retail, we will realize DX in retail industry through the full use of communications, data and AI. At Real x Tech Lawson, first store in Takanawa new headquarters, which will be relocated next year, we will conduct demonstration trials of technologies that provide customers with new convenience store experience such as AI, smartphone, cash registers and one-to-one signage and robotics that support store operations such as stocking and cleaning to accumulate know-how. By returning value honed through practice to retail customers, we will accelerate DX in the entire industry. We will also build an AI infrastructure to support WAKON-CROSS. As the use of generative AI diversifies in the future, it is important to build an optimal framework that includes not only cloud, but also edge and on device. Here we can leverage know-how that we can -- we have cultivated over many years in communication networks and data center operations. Left side AI data center that can handle large-scale calculations will be built as the cloud side infrastructure. In addition to utilizing the extensive land and ample power at the former Sharp (OTC:SHCAY) Sakai plant site, we also plan to build a new AI data center in Tama. We will build the edge side infrastructure efficiently where timely processing is required, utilizing eight bases in Japan, including Tama and Oyama data centers. Next is MWC Barcelona 2025. KDDI will exhibit in March next year. As we did last year, we will exhibit and showcase communications and AI, mobility and retail tech to the world. Specific details of the exhibition will be announced in the future. Next is strengthening of management base. In order to transform ourselves into a human resource first company, we have promoted KDDI Version Job Style Personnel System. As a result, the number of mid-career recruitment increased by about 10 times in 10 years. The ratio of professional human resources increased to about 40% in expertise areas, and the number of young professionals, young personnel in managerial positions tripled in three years. In August, we were recognized and selected as precedent for government personnel guidelines. Next is our capital policy for sustainable growth. Left side, we resolved the reduction of investment unit through two-for-one stock split in order to attract new individual investors who can support our sustainable growth. Right side, we resolved additional share repurchase up to JPY100 billion of our own shares through market purchases. Including the JPY100 billion, the total amount of repurchase for FY March '25 is up to JPY400 billion. This is today's summary. The consolidated results for the first-half of FY March '25 show an increase in revenue and income and steady progress in line with full year forecasts. Efforts toward satellite growth strategies are progressing steadily for mid-term growth. In [Technical Difficulty] progressed steadily. Towards strengthening of the momentum, we are promoting attractiveness of KDDI with our multi-brand strategy and high quality network. In Business Services segment, growth area is driving growth with double-digit growth in both operating revenue and income. We will promote WAKON-CROSS initiatives and construction of AI infrastructure to support it. As our capital policy for sustainable growth, we resolved the reduction of investment unit in order to attract new individual investors. In addition, we resolved additional share repurchase up to JPY100 billion of owned shares through market purchases. The total amount of repurchase for FY March '25 is up to JPY400 billion. Let me take a few moments after this to share our thoughts on the NTT Law. On October 29, I made a presentation at a hearing for operators at the MIC Council and I basically agree with the direction of the direct draft report from the discussions at the Council so far. I understand that the NTT law, which came into being with the privatization of NTT Public Corporation, needs to be updated in response to the changes of the times and that deliberate discussions were held on areas to be relaxed and strengthened, and that the direction of the discussions has been clarified. The table shows the main issues and the direction of the draft report, and we recognize the conclusion of the discussions is that no argument is found for daring to change the current legal system or abolishing the NTT law. The same view was expressed by legal experts. The Council is scheduled to compile its report in the future and we will continue to monitor it closely. Thank you very much for your attention.
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