Softbank Group Corp. · TSE:9984
Softbank — Q3 FY2006 Earnings Presentation
58 slides from Softbank's earnings presentation, Feb 9, 2007
Slide 1: Earning Results for the Third Quarter Ended December 31, 2006
Earning Results for the Third Quarter Ended December 31, 2006 (3Q/FY2006) Analyst Meeting 9 February 2007 SOFTBANK CORP.
Slide 2: Summary of Consolidated Results
Summary of Consolidated Results Kazuhiko Kasai Director SOFTBANK CORP. 2
Slide 3: Summary of Consolidated P&L
1.Summary of Consolidated P&L Unit: bn JPY Previous 3rd Current 3rd Previous full- ＜9 months Cum.＞ Movement close Cum. close Cum. year (ref.) Net Sales 810.2 1,822.3 1,012.1 1,108.6 Operating income 27.9 197.2 169.3 62.2 Ordinary income (2.2) 111.6 113.8 27.4 Income before income taxes and minority
Slide 4: Summary of Net sales
2. Summary of Net sales Unit: bn JPY 800 Mobile Communications BB infrastructure 702.1 700 Fixed-line Telecom Internet Culture 625.9 600 e-Commerce Others 494.2 500 Elimination or Corporate 400 298.4 258.6 264.1 287.4 300 200 100 0 -100 ＦＹ０５．１Ｑ ＦＹ０５．２Ｑ ＦＹ０５．３Ｑ ＦＹ０５．４Ｑ ＦＹ０６．１Ｑ ＦＹ０６．２Ｑ ＦＹ０６．３Ｑ Consoli
Slide 5: Summary of Operating income
3. Summary of Operating income Unit: bn JPY 100 Mobile Communications BB infrastructure 84.7 80 Fixed-line Telecom Internet Culture e-Commerce Others 54.3 58.1 60 34.3 40 23.5 20 7.5 0 -3.1 -20 ＦＹ０５．１Ｑ ＦＹ０５．２Ｑ ＦＹ０５．３Ｑ ＦＹ０５．４Ｑ ＦＹ０６．１Ｑ ＦＹ０６．２Ｑ ＦＹ０６．３Ｑ Consolidation (3.1) 7.5 23.5 34.3 54.3 58.1 84.7 M
Slide 6: Consolidated P&L: current vs previous 9 months
4. Consolidated P&L ・YOY: current (Apr06～Dec06) vs previous (Apr05～Dec05） Unit: bn JPY Previous 3rd Current 3rd (9 months Cum.) Movement ・Increase interest expense:(33bn) Quarter Quarter Net Sales 810.2 1,822.3 1,012.1 ・Loan handling fee: (28.3bn) *Related to bridge loan and WBS financing Operating
Slide 7: Consolidated P&L: 3Q vs 2Q
5. Consolidated P&L ・Compare to latest quarter: current 3Q(Oct06～Dec06) vs current 2Q(Jul06～Sep06) Previous 3rd Current 3rd Unit: bn JPY (Quarterly) Movement Quarter Quarter Net Sales 625.9 702.1 76.2 ・WBS handling fee: (8.4bn) Operating income 58.1 84.7 26.5 ・Increase interest expense: (3bn) Non-op
Slide 8: Consolidated BS (end Dec.)
6. Consolidated BS (end Dec.) Unit: bn JPY Interest bearing debt Cash and deposits Loan：1,975.5bn 394.7bn Current assets Current liabilities Corporate bond： 475.4bn Receivables, etc. CP： 19.8bn 471.2bn 1,109.2 1,113.8 Total： 2,470.8bn Stock in hand 79.6bn Property and equipment, net Long-term liabil
Slide 9: BS Comparison (end Dec. vs end Mar.)
7. BS Comparison (end Dec. vs end Mar.) Unit: bn JPY Cash and deposits: (51.5bn) ・Mainly payment for SB Mobile acquisition, etc. As of Mar As of Dec Movement Related to SB Mobile consolidation: 31, 2006 31, 2006 ・Receivables, etc.： +282.3bn Assets ・Inventories：+29bn ・Deferred tax assets: +54.7bn Cur
Slide 10: Total asset / shareholders' equity ratio
8. Total asset / shareholders’ equity ratio Unit: bn JPY, % 4,500 4,191.8 T otal assets 4,031.0 3,986.9 4,000 Shareholders'equity 3,500 3,000 2,500 2,000 1,748.6 1,808.3 1,620.8 1,578.9 1,500 1,000 500 219.1 242.7 235.1 249.1 267.8 167.3 170.3 0 ＦＹ０５．１Ｑ ＦＹ０５．２Ｑ ＦＹ０５．３Ｑ ＦＹ０５．４Ｑ ＦＹ０６．１Ｑ ＦＹ０６．２Ｑ ＦＹ０６．３
Slide 11: Consolidated CF
9. Consolidated CF Unit: bn JPY (Quarterly) Fiscal year ended March 31, 2006 Fiscal year ended March 31, 2007 1Q 2Q 3Q 4Q 1Q 2Q 3Q Cash flows from operating activities (18.2) 0.2 61.9 13.8 64.6 122.4 71.1 Cash flows from investing activities (28.7) (45.5) 86.6 15.5 (1,965.8) 8.8 (71.6) Cash flows fr
Slide 12: Consolidated EBITDA
10. Consolidated EBITDA Unit: bn JPY 180 Mobile Communications BB infrastructure 154.0 Fixed-line Telecom Internet Culture 140 e-Commerce Others 124.0 Elimination or Corporate 104.3 100 54.9 60 44.7 19.5 30.7 20 -20 ＦＹ０５．１Ｑ ＦＹ０５．２Ｑ ＦＹ０５．３Ｑ ＦＹ０５．４Ｑ ＦＹ０６．１Ｑ ＦＹ０６．２Ｑ ＦＹ０６．３Ｑ Consolidation 19.5 30.7 44.7
Slide 13: Summary of Major Telecommunication Segments
Summary of Major Telecommunication Segments Kazuhiko Fujihara CFO, Executive Officer, Senior Vice President SOFTBANK MOBILE Corp. 13
Slide 14: Performance summary of major telecommunication segments
Performance summary of 3 major telecommunication segments Unit: bn JPY ＜Broadband Infrastructure Business＞ (From Sep. 2001) Previous １Ｑ－３Ｑ Current １Ｑ－３Ｑ Movement Previous full year (ref) Net sales* 197.1 196.3 (0.8) 268.4 Operating income 8.3 19.4 11.0 20.6 ＥＢＩＴＤＡ 30.7 39.8 9.0 48.9 ＜Fixed-line Tele
Slide 15: Broadband Infrastructure Business
Broadband Infrastructure Business 15
Slide 16: Operating income and EBITDA (BB business)
1. Operating income and EBITDA (BB business) Unit: bn JPY 60 Operating income (loss) EBITDA 39.8 40 30.7 19.4 20 8.3 0 -20 (27.8) -40 (47.1) -60 04/1-3Q 05/1-3Q 06/1-3Q 16
Slide 17: Operating income (BB business)
2. Operating income (BB business) Unit: bn JPY Impact of modem rental business sell-off 20 Operating income (loss) excl. impact of modem rental business sell-off Operating income (loss) 12.3 9.3 10 7.7 7.0 5.4 6.1 7.6 6.7 6.3 8.2 5.3 3.4 1.7 0 (1.2) (0.1) (0.5) (4.4) (6.5) (12.4) (17.9) (18.3) (16.3
Slide 18: EBITDA (BB business)
3. EBITDA (BB business) Unit: bn JPY Impact of modem rental business sell-off 18.1 20 EBITDA excl. impact of modem rental business sell-off 16.3 15.4 EBITDA 4.8 11.8 12.6 5.8 10 18.1 15.3 14.9 13.2 11.4 10.5 3.0 0 0.8 (3.4) (2.3) (2.7) (5.8) (11.8) (11.4) (10.5) (15.2) (14.0) -10 (23.6) -20 -30 03/1
Slide 19: Number of lines and charged users – ADSL
4. Number of lines and number of charged users – ADSL – K Cummulative lines installed 6,000 Charged users 5,089 5,146 5,161 4,972 5,007 5,049 4,889 5,000 4,776 4,658 4,575 4,490 4,462 4,474 4,534 4,381 4,436 4,282 4,206 4,130 3,938 4,000 3,784 3,571 3,000 2,000 1,000 0 04/1Q 2Q 3Q 4Q 05/1Q 2Q 3Q 4Q
Slide 20: Product MIX – ADSL
5. Product MIX – ADSL – 100% 100% 50M ratio 25．8％ 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% Wireless LAN 20% 20% ratio 28.7% 10% 10% 0% 0% 3Q 4Q 03/1Q 2Q 3Q 4Q 04/1Q 2Q 3Q 4Q 05/1Q 2Q 3Q 4Q 06/1Q 2Q 3Q BB Phone only YBB 8M (ADSL only) YBB 8M YBB 8M+WLAN YBB 12M YBB 12M+WLAN YBB 26M YBB
Slide 21: ARPU – ADSL
6. ARPU (user’s payment base) – ADSL – （yen） 5,000 4,395 4,500 4,000 Yahoo!ISP 3,500 BB Security 3,000 BB Phone Wireless LAN 2,500 Modem rental fee Basic charge 2,000 1,500 1,000 500 0 01/3Q 4Q 02/1Q 2Q 3Q 4Q 03/1Q 2Q 3Q 4Q 04/1Q 2Q 3Q 4Q 05/1Q 2Q 3Q 4Q 06/1Q 2Q 3Q *The above graph is based on user’
Slide 22: Churn rate – ADSL
7. Churn rate – ADSL – 10.0% 9.0% 8.0% 7.0% 6.0% Due to temporary and seasonal factors e.g. relocation period 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Jan- Fe b- M ar- Apr- M ay- Jun- Jul- Aug- Se p- Oct- Nov- De c- Jan- Fe b- M ar- Apr- M ay- Jun- Jul- Aug- Se p- Oct- Nov- De c- 05 05 05 05 05 05 05 05 05 05
Slide 23: Fixed-line Telecommunications Business
Fixed-line Telecommunications Business 23
Slide 24: Net sales and operating income (Fixed-line Telecom)
1. Net sales and operating income (Fixed-line Telecom business) Unit: bn JPY 40 Operating income (loss) 31.8 30 EBITDA 20 3 months (Oct, Nov, Dec) 10 7.3 0 (2.3) -10 (14.2) -20 -30 (28.0) -40 24
Slide 25: Operating income and EBITDA (Fixed-line Telecom)
2. Operating income and EBITDA (Fixed-line Telecom business) Unit: bn JPY Reversal of retirement benefit AC liquidation 20 Temporal factor Seasonal factor 14.2 15 12.6 10.2 10 9.1 8.9 5 2.9 1.2 0.0 0 (0.3) (0.9) (1.8) (1.7) -5 (2.6) (6.2) -10 (12.2) -15 (14.0) (14.2) -20 (21.7) -25 05/3Q 4Q 06/1Q 2Q
Slide 26: Number of lines of Otoku Line
3. Number of lines of “Otoku Line” （K） 1,200 Consumer SME (excl. JTI) Large company SME (JTI) Heisei Denden 1,000 Sales agent administration work was transferred to JAPAN TELECOM INVOICE (JTI) in 3Q of FY2005. JT (SBTM) focuses on direct sales to large companies. 800 Corporate line ratio 55% (as of
Slide 27: Otoku Line ARPU
4. “Otoku Line” ARPU SOFTBANK TELECOM focuses on corporate sales in order to obtain highly profitable customers such as large companies （Yen） consumer SME (excl JTI) 12,000 large company 10,000 8,000 6,000 4,000 2,000 0 FY05/1Q 2Q 3Q 4Q FY06/1Q 2Q 3Q 27
Slide 28: Focus area of SOFTBANK TELECOM: 3 focus businesses
5. Focus area of SOFTBANK TELECOM 9 Focus on direct sales of “Otoku Line” Enforcement of 9 Enhance “Internet Data Service” Corporate business 9 Full-fledged start of corporate mobile sales 3 focus businesses Internet Corporate Otoku Line & Data mobile Lean management ⇒Profitable 28
Slide 29: Mobile Communications Business
Mobile Communications Business 29
Slide 30: Operating income and EBITDA (SB Consolidation)
1. Operating income and EBITDA (SB Consolidation) Unit: bn JPY 120 104.0 100 Operating income EBITDA 80 73.6 60 55.8 56.9 Newly established in 1Q of FY2006 ending in 40 March 2007 27.2 29.3 20 0 05/1Q 2Q 3Q 4Q 06/1Q 2Q 3Q 2 months (May, June) 30
Slide 31: Operating income and EBITDA (SBM Consolidation)
2. Operating income and EBITDA (SBM Consolidation) Unit: bn JPY 120 Operating income EBITDA 103.1 100 91.3 83.8 80 76.8 74.3 68.7 63.8 60 50.6 40 35.1 31.1 19.0 18.3 20 13.7 8.3 0 05/1Q 2Q 3Q 4Q 06/1Q 2Q 3Q Based on former Vodafone K.K. consolidation 31
Slide 32: Net addition (monthly)
3. Net addition [Monthly] （K） Jan 2007 net addition share 200 43% 164 150 Highest value ever 97 100 69 64 64 63 57 50 50 25 27 27 23 24 18 18 18 18 17 16 10 12 13 1 5 4 3 5 1 0 (3) (7) -50 (40) (40) (53) (59) -100 2004 2005 2006 2007 Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Vodafone K.K. 32
Slide 33: Net addition vs competitors
4. Net addition [Monthly] (K) 350 300 Net addition is increasing every month 250 KDDI 200 150 100 50 NTT DoCoMo 0 Apr M ay Jun Jul Aug Sep Oct Nov Dec Jan 2006 2007 -50 *Source: Disclosed information from each company 33
Slide 34: 3G Customer number
5. 3G Customer number （K） 18,000 15,660 16,000 14,000 End Jan 2007 12,000 3G customer: 6,589k 3G ratio 42% 10,000 (vs end Sep +12% 8,000 End Dec 06 6,000 customer：5,961k 3G customer： ratio： 38.5% 3G ratio： (vs end Sep +8.7%） 4,000 6,589 5,961 4,562 2,000 3,715 3,038 2,318 917 1,299 1,754 199 261 366
Slide 35: 3G Ratio
6. 3G Ratio (%) SoftBank NTT DoCoMo KDDI 100 75 【万回線】 50 42% (Jan 07) (Dec 06) 38.4% 25 (Dec 05) 15.3% (Dec 04) 0 2.4% 2002 2003 2004 2005 2006 *Based on disclosed information by each company SOFTBANK MOBILE started its 3G service from Dec 2002, and KDDI from Apr 2002 35
Slide 36: ARPU
7. ARPU （JPY） Monthly fee 2 months free Data Voice DoCoMo au Packet 2 months free 8,000 Impact from campaign, etc. 7,000 6,290 6,140 6,080 5,870 5,930 5,840 5,810 5,700 6,000 5,600 5,590 5,560 5,000 4,000 4,820 4,940 4,780 4,540 4,540 4,510 4,490 4,260 4,230 4,320 4,230 3,000 2,000 1,000 1,320 1,350
Slide 37: Introduction of handset installment sales method
8. Introduction of handset installment sales method Goals of introduction 1. Normalize the handset sales model ¾ Correction of unfairness among subscribers ¾ Ensure recoup of handset cost 2. Acquisition of long-tenure users ¾ Decrease of churn rate 3. Set attractive price plans ¾ Super Bonus Special
Slide 38: Impact of installment sales introduction (Super bonus)
9. Impact of install sales introduction (Super bonus) 2Q 3Q Note Large amount of sales incentive to Installment sales to customers Handset sales model be paid to agents (lump-sum payment possible) Unit price for acquisition 43,800JPY 22,400JPY To decrease Discount certain amount from basic charge, p
Slide 39: Installment sale of handset
10. Installment sale of handset Toward a healthy business model Traditional model Installment sale Handset Collect huge incentives Collect by cost by airtime revenue installments Airtime Charge is set Able to set charge considering collection of separately from collection handset cost of handset c
Slide 40: Effects of installment sale of handsets
11. Effects of installment sale of handsets ¾Longer handset usage period ¾Lower churn rate Installment 26 months* sale Traditionally Churn Risk *For a 2-year plan 40
Slide 41: Churn rate
12. Churn rate 5.00% Downward trend in Churn rate SBM NTT Docomo au 1.79% 1.70% 4.00% 1.47% 1.30% 3.00% Oct Nov Dec Jan 2.00% 1.60% 1.00% 1.00% 0.93% 0.00% 03/1Q 2Q 3Q 4Q 04/1Q 2Q 3Q 4Q 05/1Q 2Q 3Q 4Q 06/1Q 2Q 3Q 41
Slide 42: Progress in Commitments
—= SoftBank Progress in 4 Commitments 42
Slide 43: 3G Handset Enrichment
—= SoftBank 1. 3G Handset Enrichment 43
Slide 44: Comparison with competitors (number of models)
Comparison with competitors (number of models)* SoftBank NTT DoCoMo au Number of models Announced for Spring 07 Number of models Number of models announced announced for Spring 06 exceeds competitors *SOFTBANK MOBILE estimate 44
Slide 45: Comparison with competitors (number of colors)
Comparison with competitors (number of colors)* SoftBank NTT DoCoMo au Number of models Announced for Spring 07 Number of colors announced Number of models far exceeds competitors announced for Spring 06 *SOFTBANK MOBILE estimate 45
Slide 46: Enhancement of Sales Structure and Branding
2. Enhancement of Sales Structure and Branding 46
Slide 47: Aggressive publicity strategy
Aggressive publicity strategy Obtained high preference in CM survey* Contribute to brand image penetration In November, out of 4,398 commercials, achieved No.1! In December, out of 4,377 commercials, achieved No.2! Display prevented due to protection of portrait rights Source: CM Data Bank November:
Slide 48: Mass appliance retailers share of volumes surged
Mass appliance retailers* share of volumes surged 40% 30% 20% Rapid growth in retail sales share to 10% more than double 0% Aug Sept Oct Nov Dec Jan 2006 *Mass appliance retailer share estimated by SOFTBANK MOBILE 48
Slide 49: New price plan: rapid increase in subscribers
New price plan Rapid increase in subscribers From Oct 26 2006 In about 3 months 1.02 m applications New: 490K Upgrade*: 530K From Jan 16 2007 In about 3 weeks 1.05 m applications White Plan New: 210K Upgrade*: 840K *including change of user information To be released March 1, 2007 49
Slide 50: 3G Network Enhancement
—= SoftBank 3. 3G Network Enhancement 30
Slide 51: Enhancement of 3G network: base stations
Enhancement of 3G network: base stations （BS） 46,000 Steadily constructing base stations 25,588 Property Secured Construction In Service 0 1Q 2Q 3Q 4Q FY06 (scheduled) 51
Slide 52: Enhance Content
—= SoftBank 4. Enhance Content 92
Slide 53: Surge in page view
Surge in page view Compared to the Link to Yahoo! JAPAN end of June an set in top page increase of nearly 45 times *Page view of top page of Yahoo! JAPAN on mobile Till Sep 30th Yahoo! Mobile from Jan 10th Yahoo! Keitai 53
Slide 54: Make mobile in Japan more fun
Make mobile in Japan more fun 54
Slide 55: Make broadband in Japan more fun
Make broadband in Japan more fun 55
Slide 56: Lifestyle Company in the 21st Century
Lifestyle Company in the 21st Century Broadband available to all living people everywhere 56
Slide 57: 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. 57
Slide 58: http://www.softbank.co.jp
http://www.softbank.co.jp This presentation contains forward-looking statements including statements regarding future events, future strategies or future performance of SOFTBANK CORP. that involves risks or uncertainties. In evaluating these statements, a recipient thereof should specifically consid