KDDI Q2 net profit up despite slowing subs growth; 5G will start ‘in certain areas’ in 2019

6 Nov 2018

Japan’s second largest mobile operator by subscribers KDDI (au) recorded solid profit growth in its fiscal second quarter ending 30 September 2018 but noted that a decline in mobile revenue due to falling tariffs offset stronger gains for its Life Design and Business operating units. KDDI booked consolidated net profit of JPY166.81 billion (USD1.48 billion) for the three months under review, up 6.9% from JPY155.97 billion in the same period a year ago, as operating revenue rose 1.9% to JPY1.24 trillion from JPY1.22 trillion. Second-quarter operating income of JPY272.33 billion compared with JPY261.12 billion in fiscal 2017/18 (operating margin was up 0.6pp to 22.0%) and EBITDA improved to JPY412.51 billion from JPY405.43 billion; EBITDA margin was 33.3% (unchanged).

However, revenue derived from mobile communications fell 1.7% year-on-year in fiscal Q2 to JPY443.89 billion, which it notes would have been even steeper but for a near doubling in MVNO revenues which rose to JPY11.08 billion from JPY5.67 billion. Average revenue per account (ARPA) at its au mobile service also dipped 1.7% y-o-y to JPY5,870 a month, prompting KDDI to state that it needs to create sustainable growth in its domestic telecoms business and actively advance ‘new value proposals through integration of telecommunications and life design’ services. The cellco noted too that the introduction of new flat rate plans in July 2017 had impacted on mobile revenue, despite the overall subscriber base increasing by 7.7% on an annualised basis to 53.514 million at 30 September 2018. At the same date WIMAX unit UQ Communications reported 30.812 million subscriptions (up a net 3.71 million) and FTTH subscriptions reached 4.458 million (up 4.5%).

Finally, KDDI outlined its intentions to start offering 5G services in certain areas in 2019, focusing on stadiums, with full-scale development coming in 2020. It reportedly aims to implement its 5G core in 2021, planning to launch various services using network slicing.

Japan, KDDI (au), UQ Communications