Softbank Group Corp. · TSE:9984
Softbank — Q3 FY2008 Earnings Presentation
71 slides from Softbank's earnings presentation, Feb 5, 2009
Slide 1: Earnings Results for the Third Quarter Ended December 31, 2008
Earnings Results for the Third Quarter Ended December 31, 2008 February 5, 2009 SOFTBANK CORP. 1 February 25, 2010 Version Due to protection of rights, some of the photos and images included at the time of publication have been modified or revised.
Slide 2: Highlights
<Highlights> 1. 1. Operating Operating income: income: highest highest ever ever 2. 2. FY2008 FY2008 free free cash cash flow flow forecast forecast raised raised (free (free cash cash flow: flow: JPY JPY 150.0bn) 150.0bn) 2
Slide 3: Summary of Consolidated Earnings (9 months)
Summary of Consolidated Earnings (9 months) <bn JPY> Q1-3/FY08 Q1-3/FY07 YoY (Apr-Dec 2008) (Apr-Dec 2007) Net sales 1,982.2 2,058.7 (76.5) EBITDA 508.4 483.7 24.7 Operating income 274.6 260.1 14.5 Ordinary income 174.4 231.9 (57.5) Income before income taxes and minority interests 174.0 217.2 (43.1
Slide 4: FY2008 Forecast Raised
FY2008 Forecast Raised <bn JPY> FY2007 FY2008 FY2009 (latest forecast) (forecast) Operating income 324.2 340.0 420.0 Free cash flow (164.2) 140.0 250.0 4
Slide 5: FY2008 Forecast Raised
FY2008 Forecast Raised <bn JPY> FY2007 FY2008 FY2009 (latest forecast) (forecast) Operating income 324.2 340.0 420.0 Free cash flow (164.2) 150.0 250.0 Forecast raised from JPY 140.0bn 5
Slide 6: Consolidated Earnings Results
Consolidated Earnings Results 6
Slide 7: Consolidated Net Sales (9 months)
Consolidated Net Sales (9 months) 2,500 <bn JPY> 2,058.7 1,982.2 2,000 1,822.3 1,500 1,212.0 1,144.8 1,008.5 1,000 Mobile Communications 192.8 189.5 173.9 Broadband Infrastructure 236.2 235.9 Fixed-line Telecommunications 500 247.7 174.0 187.2 Internet Culture 139.1 178.3 184.0 184.4 e-Commerce 0 Q1
Slide 8: Mobile Communications Segment Net Sales (9 months)
Mobile Communications Segment Net Sales (9 months) <bn JPY> 1,400 1,212.0 1,200 1,144.8 1,000 445.5 366.1 Handset sales, etc. (79.3) 800 Telecom service revenue, etc. 600 +12.1 778.6 400 766.5 Telecom service 200 revenue 0 Q1-3 Q1-3 increased (YoY) FY2007 FY2008 8
Slide 9: Increasing Trend in Telecom Service Revenue
Mobile Communications Segment Increasing Trend in Telecom Service Revenue (%) 15 Movement of Telecom Service Revenue Revenue (YoY) increase is 10 expected in 5 FY2009 0 -5 -10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 -15 FY2006 FY2007 FY2008 9
Slide 10: Increasing Trend in Telecom Service Revenue
Mobile Communications Segment Increasing Trend in Telecom Service Revenue (%) 3 Major Mobile Operators 15 Movement of Telecom Service Revenue (YoY) Increasing trend 10 for SOFTBANK 5 0 Movement of FY08/Q3 -5 SOFTBANK : 4.3% SOFTBANK NTT DOCOMO :(6.4%) NTT DOCOMO -10 KDDI KDDI :(1.3%) Q1 Q2 Q3 Q4 Q1
Slide 11: Consolidated EBITDA (9 months)
Consolidated EBITDA (9 months) 550 <bn JPY> 508.4 483.7 450 382.4 303.7 Highest ever 350 304.8 233.4 250 Mobile Communications 54.1 Broadband Infrastructure 150 52.0 39.8 45.5 Fixed-line Telecommunications 34.8 31.8 Internet Culture 50 91.8 100.9 76.7 e-Commerce Q1-3 Q1-3 Q1-3 -50 FY2006 FY2007 FY20
Slide 12: Consolidated Operating Income (9 months)
Consolidated Operating Income (9 months) <bn JPY> 300 274.6 260.1 250 197.2 134.9 Highest ever 200 147.9 Mobile Communications 150 113.5 36.6 Broadband Infrastructure 100 30.2 11.3 Fixed-line Telecommunications 19.4 50 83.7 92.0 Internet Culture 69.3 0 e-Commerce Q1-3 Q1-3 Q1-3 FY2006 FY2007 FY2008
Slide 13: Comparison of Operating Income
Mobile Communications Segment/SOFTBANK MOBILE Consolidated Comparison of Operating Income <bn JPY> 147.9 150 113.5* 134.9 Mobile Communications segment 100 50 0 Q1-3 Q1-3 Q1-3 FY2006 FY2007 FY2008 *Operating results of Mobile Communications segment from Q1 to Q3 of FY2006 reflect 13 8 months results
Slide 14: Comparison of Operating Income
Mobile Communications Segment/SOFTBANK MOBILE Consolidated Comparison of Operating Income 146.8 <bn JPY> 147.9 150 SOFTBANK MOBILE consolidated 134.9 Mobile Communications segment 113.5* 136.4 100 100.1 SOFTBANK MOBILE 50 revenue increase by 7.6% 0 Q1-3 Q1-3 Q1-3 FY2006 FY2007 FY2008 *Operating resu
Slide 15: Details of Variance in Operating Income
Mobile Communications Segment/SOFTBANK MOBILE Consolidated Details of Variance in Operating Income FY06 FY07 FY08 <bn JPY> Q1-3 Q1-3 Q1-3 SOFTBANK MOBILE Consolidated operating 100.1 136.4 146.8 income (9 months) Consolidation adjustment Amortization of goodwill (37.6) (38.5) (38.5) Variance of depr
Slide 16: Consolidated Ordinary Income (9 months)
Consolidated Ordinary Income (9 months) 250 <bn JPY> 231.9 One time gain due to IPO of Alibaba.com Limited 200 57.2 174.4 150 111.6 FY08/Q1-3 100 174.7 JPY 174.4bn 50 0 Q1-3 Q1-3 Q1-3 FY2006 FY2007 FY2008 *Operating results of SOFTBANK MOBILE Corp. were consolidated from May 2006 16
Slide 17: Consolidated Net Income (9 months)
Consolidated Net Income (9 months) 100 <bn JPY> 93.1 One time gain due to IPO of Alibaba.com Limited 57.2 58.1 50 FY08/Q1-3 21.9 JPY 58.1bn 35.9 0 Q1-3 Q1-3 Q1-3 FY2006 FY2007 FY2008 *Operating results of SOFTBANK MOBILE Corp. were consolidated from May 2006 17
Slide 18: Consolidated Net Income (9 months)
Consolidated Net Income (9 months) <bn JPY> Q1-3/FY08 Q1-3/FY07 Notes (Apr-Dec 2008) (Apr-Dec 2007) Ordinary income 174.4 231.9 Special (14.7) (0.3) income/loss (net) Income before income taxes and minority interests 174.0 217.2 Income tax: Current 53.2 30.2 BB Mobile, SOFTBANK Income tax: Deferred
Slide 19: Operating Cash Flow (9 months)
Operating Cash Flow (9 months) <bn JPY> 300 270.7 250 200 Improved by 150 JPY 213.5bn YoY 100 57.2 50 0 Q1-3 Q1-3 FY2007 FY2008 19
Slide 20: Free Cash Flow (9 months)
Free Cash Flow (9 months) <bn JPY> 200 150 100 47.6 50 Improved by 0 -50 JPY 264.0bn YoY -100 -150 -200 -250 -216.3 Q1-3 Q1-3 FY2007 FY2008 20
Slide 21: CAPEX (acquisition base/annual)
CAPEX (acquisition base/annual) <bn JPY> 389.8 400 (annual plan ) 293.7 300 276.5 (annual forecast) 308.4 220.0 Q3 200 174.7 Mobile Communications 148.9 235.3 Broadband Infrastructure 47.6 129.1 100 22.1 Fixed-line Telecommunications 82.6 37.6 21.2 10.8 21.8 22.8 Others 0 FY2005 FY2006 FY2007 FY2008
Slide 22: Interest-bearing Debt Status
Interest-bearing Debt Status 22
Slide 23: Consolidated Interest-bearing Debt
Consolidated Interest-bearing Debt 3,000 <bn JPY> 2,557.3 2,500 2,432.2 193.4 218.8 Securitization of installment receivables (SOFTBANK MOBILE) 2,000 1,295.0 1,207.7 SBM loan (WBS)*1 1,500 1,000 84.5 84.5 Vodafone Subordinated loan 450.6 481.4 Loans from other financial institutions 500 533.6 439.6
Slide 24: Corporate Bonds Redemption Schedule
Corporate Bonds Redemption Schedule Abundant repayment resources available <bn JPY> 500 423.3 SOFTBANK straight bonds Unused portion of credit line facility SOFTBANK TELECOM straight bonds 400 36.0 SOFTBANK convertible bonds 300 Cash position 200 387.3 100 <50.0> <50.0> 45.0 <50.0> 19.0 20.0 36.4 0
Slide 25: SBM Debt Status
== ooftBank SBM Debt Status a )
Slide 26: Debt Balance After Mobile Business Acquisition
Debt Balance After Mobile Business Acquisition 1,400 <bn JPY> 1,200 1,000 Forecast Steadily 800 repaying 600 400 Minimum 200 0 e 09 10 11 12 13 14 15 16 17 18 nc 20 20 20 20 20 20 20 20 20 20 ala FY FY FY FY FY FY FY FY FY FY lb tia 26 Ini *Loan started: :November 2006 *WBS balance mainly borrowed b
Slide 27: Balance of Loans of SBM
Balance of Loans of SBM <bn JPY> 1,342.1 Repaying ahead of schedule 1,350 1,311.4 1,295.0 1,300 1,276.4 Cumulative repayment 1,261.9 1,250 1,239.2 JPY 181.1bn (end of Jan 2009) 1,207.7 1,200 1,184.8 0 1,150 Q1 Q2 Q3 Q4 Q1 Q2 Q3 End of Jan 2009 *Balance of WBS loan borrowed by SBM FY2007 FY2008 27
Slide 28: Financial Indexes
== ooftBank Financial Indexes a 2 8
Slide 29: Improvement of Key Financial Indexes
Improvement of Key Financial Indexes Q1-3/FY08 Q1-3/FY07 Improvement (Apr-Dec 2008) (Apr-Dec 2007) rate EBITDA margin 25.7% 23.5% +9% (EBITDA/net sales) Equity ratio 9.0% 8.7% +3.9% (total shareholders’ equity/total assets) D/E ratio 6.3 times 6.6 times +4.6% (interest-bearing debt/total shareholder
Slide 30: EBITDA Margin by Segment
EBITDA Margin by Segment (%) Broadband Infrastructure 30 Mobile Communications 25 SOFTBANK Consolidated 20 Fixed-line Telecommunications 15 10 0 *EBITDA margin = EBITDA/net sales Q1-3 Q1-3 Q1-3 FY2006 FY2007 FY2008 30
Slide 31: In-Substance Redemption of Former Vodafone K.K. Bonds; CDO Status
In-Substance Redemption Before Maturity (in-substance defeasance) of Bonds Issued by Former Vodafone K.K. Status of collateralized debt obligations (CDO) No change after the announcement of earnings results for Q2 Currently 6 default names No loss incurred (as of February 5) 31
Slide 32: Credit Rating
Credit Rating JCR (AA-) AA-/AA3 WBS structured A+/A1 finance rating S&P ( ) (senior portion) A/A A-/A3 Moody’s (A3) BBB+/Baa1 JCR (BBB) BBB/Baa2 BBB-/Baa3 SOFTBANK BB+/Ba1 Moody’s (Ba2) rating BB/Ba2 S&P BB-/Ba3 B+/B1 Acquisition of Acquisition of JAPAN TELECOM Vodafone K.K. 2003 2004 2005 2006 2007
Slide 33: Consolidated Earnings Forecasts
Consolidated Earnings Forecasts 33
Slide 34: FY2009 Consolidated Earnings Forecast
FY2009 Consolidated Earnings Forecast <bn JPY> FY2007 FY2008 FY2009 (latest forecast) (forecast) Operating income 324.2 340.0 420.0 Free cash flow (164.2) 150.0 250.0 34
Slide 35: FY2009 Operating Income Increase Forecast
FY2009 Operating Income Increase Forecast (bn JPY) Telecom service Communications revenue increase 500 Mobile JPY +60.0bn 420.0bn 400 Cost reduction 340.0bn JPY +40.0bn 300 Non-mobile JPY +20.0bn 200 Buffer 100 JPY (40.0bn) 0 Total JPY 80.0bn FY2008 FY2009 (latest forecast) (forecast) 35
Slide 36: FY2009 Free Cash Flow Increase Drivers
FY2009 Free Cash Flow Increase Drivers (bn JPY) 300 250 250.0bn Operating income increase 200 JPY+80.0bn 150 150.0bn Efficient CAPEX etc. JPY +20.0bn 100 50 Total JPY 100.0bn 0 FY2008 FY2009 (forecast) (forecast) 36
Slide 37: FY2009 Operating Income Increase Forecast
FY2009 Operating Income Increase Forecast FY2009 Income Increase Drivers (forecast) Telecom service (1) JPY +60.0bn revenue increase (2) Cost reduction JPY +40.0bn (3) Non-mobile JPY +20.0bn Buffer JPY (40.0bn) Commitment JPY +80.0bn 37
Slide 38: (1) Telecom Service Revenue Increase
(1) Telecom Service Revenue Increase FY2009 Income Increase Drivers (forecast) Telecom service (1) JPY +60.0bn revenue increase 38
Slide 39: (1) Telecom Service Revenue Increase Drivers
(1) Telecom Service Revenue Increase Drivers FY2009 Income Increase Drivers (forecast) - Subscriber increase Telecom service - Smaller impact of (1) JPY +60.0bn ‘Monthly Discounts’ revenue increase - Data ARPU increase 39
Slide 40: Telecom Service Revenue Increase (subscription increase)
(1)Telecom Service Revenue Increase (subscription increase) Breakdown of Subscriptions (m) 20.10 20 General (postpaid) 15 15.20 subscriptions up by 5.50m 10 19.10 13.60 General (postpaid) 5 1.60 1.00 Prepaid 0 Time of Now acquisition (end of Jan, 2009) (end of Mar, 2006) 40
Slide 41: Telecom Service Revenue Increase (lower churn rate)
(1)Telecom Service Revenue Increase (lower churn rate) (%) Churn Rate 1.8 1.66% Churn rate 1.6 1.60% 3G churn rate* Lowest ever 1.4 FY08/Q3 1.21% 1.2 Churn rate 0.91% 1.0 0.88% 0.8 FY08/Q3 3G churn rate* 0.6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 0.69% FY2006 FY2007 FY2008 * Excluding prepaid. 41
Slide 42: Telecom Service Revenue Increase (longer HS tenure)
(1)Telecom Service Revenue Increase (longer HS tenure) Average HS Tenure (months) 40 39 Average HS 35 tenure exceeds 3 years 30 28 25 25 24 20 FY2005 FY2006 FY2007 Q1-3 FY2008 * Average HS tenure = 1/(Upgrade rate + Churn rate) 42
Slide 43: Smaller impact of Monthly Discounts
(1)Telecom Service Revenue Increase (smaller impact of Monthly Discounts) Per-user Communication Charge and HS Tenure (illustrative) Comm. charge* 24 months (FY2006 ave.) *Monthly fee including basic monthly charge, voice call charge, communication charge, etc. 43
Slide 44: Smaller impact of Monthly Discounts
(1)Telecom Service Revenue Increase (smaller impact of Monthly Discounts) Per-user Communication Charge and HS Tenure (illustrative) Monthly Discounts 24 months Comm. charge* 24 months (FY2006 ave.) *Monthly fee including basic monthly charge, voice call charge, communication charge, etc. 44
Slide 45: Smaller impact of Monthly Discounts
(1)Telecom Service Revenue Increase (smaller impact of Monthly Discounts) Per-user Communication Charge and HS Tenure (illustrative) Monthly Discounts 24 months Comm. charge* 24 months 28 months (FY2006 ave.) (FY2007 ave.) *Monthly fee including basic monthly charge, voice call charge, communication
Slide 46: Smaller impact of Monthly Discounts
(1)Telecom Service Revenue Increase (smaller impact of Monthly Discounts) Per-user Communication Charge and HS Tenure (illustrative) Monthly Discounts 24 months Comm. charge* 24 months 28 months 39 months (FY2006 ave.) (FY2007 ave.) (Q1-3/FY2008 ave.) *Monthly fee including basic monthly charge, voi
Slide 47: (2) Cost Reduction
(2) Cost Reduction FY2009 Income Increase Drivers (forecast) Telecom service (1) JPY +60.0bn revenue increase (2) Cost reduction JPY +40.0bn 47
Slide 48: (2) Cost Reduction Drivers
(2) Cost Reduction Drivers FY2009 Income Increase Drivers (forecast) HS related cost cuts Telecom service (1) JPY +60.0bn - Acquisition cost cut revenue increase - HS procurement cost cut (2) Cost reduction JPY +40.0bn Doubtful accounts improvement - Eliminate fraud - Stricter credit screening Other
Slide 49: Cost Reduction (improvement in doubtful accounts)
(2)Cost Reduction (improvement in doubtful accounts) k) Trend in Short-Term Churn 120 100 Big drop in 80 short-term churn 60 40 20 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY07 FY08 49
Slide 50: Allowance for Doubtful Accounts of Installment Receivables
(2)Cost Reduction (improvement in doubtful accounts) Allowance for Doubtful Accounts of Installment Receivables and (bn JPY) Loss (on P/L) 12 10.1 Incurred before FY08/Q2 10 Reversal of allowance for (1.6) 8.7 doubtful accounts 7.7 Incurred in FY08/Q3 8 7.1 Allowance for doubtful +1.9 6.2 accounts 6
Slide 51: FY2009 Operating Income Increase Forecast
FY2009 Operating Income Increase Forecast FY2009 Income Increase Drivers (forecast) Telecom revenue (1) JPY +60.0bn increase (2) Cost cut JPY +40.0bn (3) Non-mobile JPY +20.0bn Buffer JPY (40.0bn) Commitment JPY +80.0bn 51
Slide 52: Mobile Business
—= softBank a Mobile Business ——— Sa 52
Slide 53: Net Adds Share (by calendar year)
Net Adds Share (by calendar year) (%) 3 Major Mobile Operators Net adds share Net Adds Share (CY) 60 54%* 50 SOFTBANK 40 30 NTT DOCOMO 20 KDDI 10 Display prevented 0 due to protection of rights. -10 2005 2006 2007 2008 (CY) (CY) (CY) (CY) Source: Created by the Company based on Telecommunications Ca
Slide 54: 2008 Net Increase in Subscriptions (calendar year)
2008 Net Increase in Subscriptions (calendar year) 3 Major Mobile Operators (m) 2008 Annual Net Adds 3 Achieved No.1* in annual net adds for 2.38 2008, first time in 2 SOFTBANK history 1 1.00 0.99 Display prevented due to protection of rights. 0 SOFTBANK NTT DOCOMO KDDI Source: Created by the Compan
Slide 55: Subscriptions Trend
Subscriptions Trend Subscriptions to SOFTBANK MOBILE (m) Former Vodafone Exceeded 20 million 20.12 subscribers on 20 Jan 1, 2009 15 Display prevented due to protection of rights. 10 Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec FY2004 FY2005 FY2006 FY2007 FY2008 55
Slide 56: Continue High Preference in TVCM
Continue High Preference in TVCM By company By TVCM By brand 1st 1st 1st Display prevented Jan, 2008 (Among 1,276 companies) (Among 4,767 pieces) (Among 3,294 brands) due to protection of rights. Feb, 2008 1st 1st 1st (Among 1,167 companies) (Among 4,324 pieces) (Among 2,991 brands) Mar, 2008 1st 1s
Slide 57: Increase in Total Monthly Payment Per User
Increase in Total Monthly Payment Per User Total Monthly Payment Per User (average)* (JPY) 6,000 5,590 5,700 5,580 5,430 5,480 5,530 5,520 5,540 5,570 5,720 5,770 20 220 480 730 1,000 5,000 1,230 1,390 1,540 1,680 HS installment payment 4,000 3,000 4,230 4,320 4,230 3,830 3,590 3,340 3,040 2,710 2,5
Slide 58: Faster Growth in Data ARPU
Faster Growth in Data ARPU Data ARPU Increase Rate (%) 20 (YoY) SOFTBANK Display prevented 15 due to protection of rights. 10 NTT DOCOMO 5 KDDI Display prevented due to protection of rights. 0 2006 2007 2008 (CY) (CY) (CY) 58 Source: created by SOFTBANK based on the disclosed quarterly materials of
Slide 59: Theme of 2009 Mobile Internet Content
Theme of 2009 Mobile Internet Content 59
Slide 60: Efforts Up to 2008
Efforts Up to 2008 Up to 2008 Yahoo! Keitai Display prevented due to protection of rights. Internet Machine 60
Slide 61: Making Mobile Internet More Fun
Making Mobile Internet More Fun Up to 2008 From 2009 MOBILE S-1 BATTLE WIDGET Yahoo! Keitai Display prevented Display prevented due to protection of rights. due to protection of rights. Display prevented due to protection of rights. Internet Machine 61
Slide 62: Overwhelming Others in Widget Volume
Overwhelming Others in Widget Volume Number of Widgets 150 140 SOFTBANK 100 100 Display prevented due to protection of rights. 70 72 KDDI NTT DOCOMO 50 50 60 0 Dec, 2008* Feb, 2009** * Compared the number of ‘Mobile Widget’ for SOFTBANK MOBILE, the number of ‘i-widget’ for NTT DOCOMO and the number
Slide 63: What is Widget?
What is Widget? Display prevented due to protection of rights. Application you can place on the standby screen, which allows access to information you want with a single touch 63
Slide 64: More New Widgets Coming
More New Widgets Coming Display prevented Display prevented due to protection of rights. due to protection of rights. Display prevented due to protection of rights. Widget creator Widget creator Widget creator Display prevented due to protection of rights. Display prevented Widget due to protection
Slide 65: Show a Video Clip
=m OOftBank Show a Video Clip 65
Slide 66: FY2008 Consolidated Earnings Forecasts
FY2008 Consolidated Earnings Forecasts <bn JPY> FY2007 FY2008 FY2009 (latest forecast) (forecast) Operating income 324.2 340.0 420.0 Free cash flow (164.2) 150.0 250.0 Forecast raised from140.0bn 66
Slide 67: FY2009 Consolidated Earnings Forecast
FY2009 Consolidated Earnings Forecast <bn JPY> FY2007 FY2008 FY2009 (latest forecast) (forecast) Operating income 324.2 340.0 420.0 Free cash flow (164.2) 150.0 250.0 No change in FY2009 earnings forecast 67
Slide 68: Lifestyle Company in the 21st Century
Lifestyle Company in the 21st Century Broadband available to all living people everywhere 68
Slide 69: SOFTBANK's Fundamental Management Policy
SOFTBANK’s Fundamental Management Policy Endeavoring to benefit society and the economy and maximize enterprise value by fostering the sharing of wisdom and knowledge gained through the IT revolution 69
Slide 70: =m OOftBank
=m OOftBank =m OOLtBank
Slide 71: FY2008/Q3 Appendix to the Earnings Result
FY2008/Q3 Appendix to the Earnings Result (Amounts less than one billion yen are omitted. / Net Sales to external customers ） Business segment unit FY2006 FY2007 FY2008 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Net sales bn JPY 231.5 350.3 426.6 422.2 389.0 419.8 403.1 406.8 370.6 399.4 374.6 Operating incom