Questions and Answers at the Results Briefing for the Fiscal Year Ended December 31, 2016 (for Analysts)

Transcription

1 WirelessGate, Inc. Questions and nswers at the Results Briefing for the Fiscal Year Ended December 31, 2016 (for nalysts) Date and time: Tuesday, February 14, 2017, from 15:30 to 16:30 Questioner 1 Please describe your strategy for the future growth of the B-to-C business. The competition in the B-to-C business environment has become increasingly intense. We believe that simple communication services are reaching their limit. Meanwhile, we had expected that the new large data plans such as 20GB and 30GB offered by communication carriers would have a greater impact on us than they actually have. The increase in traffic per user due to the launch of these large data plans has, in some cases, been faster than we expected. We therefore expect to see growth in demand, particularly from young people for public Wi-Fi facilities. n increase in traffic per user will provide us with significant opportunities. Since we design our services in a value-added structure with Wi-Fi-based licensed bands such as WiMX and LTE provided as area supplements, we anticipate the time required to reform such a service design, in which Wi-Fi is the master and communication services using licensed bands are the subordinates. To this end, adding to the availability of Wi-Fi spots will be more important than ever, and we will be focusing more closely on this issue. Because our customer base is stable, we plan to increase sales per customer and grow our business by designing our services to link devices and value-added services while considering the introduction of optional services for existing customers and the diversification of lifestyles.

2 Q2 Please describe the future increase in the cost of acquiring customers for the B-to-C business. Since our most important tasks are maintaining our current member base and acquiring new customers, we believe that improving our member base while spending the cost of acquiring customers will facilitate medium- to long-term revenue growth. We plan to increase our sales in the B-to-C business by implementing strategies such as the expansion of Wi-Fi areas, the addition of optional services, and the package sale of peripherals. Q3 Please tell us if there is a turning point of some sort in each of the businesses in the medium-term business plan. While it is difficult to specifically state which strategy contributes to sales and profit to what extent and when, we have been making steady progress in the expansion of the market for the B-to-C business, including the development of the market for the WiMX service and the bulk sale of individual services, and we believe that these efforts will help increase our corporate value in the medium to long term. Questioner 2 In the mobile internet service, quarterly net sales appear to have peaked in the third quarter and declined in the fourth quarter. Is this a result of a decrease in the number of members? Or a fall in the RPU? The memberships of customers acquired two years ago expired, and the number of members not renewing their memberships in the third and fourth quarters was higher than we had expected, which caused the fall in net sales, while competition in the environment of the mobile internet service has been intensifying, partly due to the launch of large data services of communication carriers offering 20GB or more.

3 Q2 Do you think that sales from the mobile internet service will decrease in the fiscal year ending December 31, 2017? We do not expect to see a fall in sales from the mobile internet service in the fiscal year ending December 31, 2017 at all. The competition is certainly intensifying, but we project that our mobile internet service business will continue to be steady in FY2017. Q3 You have reported that the SIM business suffered a deficit of approximately 229 million yen in the fiscal year ended December 31, What do you expect for FY2017? If you anticipate a deficit, how much will it be? We are preparing to launch new services and expect to see an increase in the revenues of the SIM business in FY2017. We are sorry, but we are not able to disclose specific numbers. Q4 Please tell us about the profitability of your B-to-B business. Our B-to-B business includes a Wi-Fi infrastructure segment and an IoT service segment. The key stock-based income source in the Wi-Fi infrastructure segment is sales from the Wi-Fi operation. The Wi-Fi infrastructure service is a high-margin business due to the low costs involved, and we expect that sales growth will contribute to an increase in operating income. The IoT service consists of two categories. One is the so-called low-speed IoT service, which is a business model that is similar to the MVNO business. More specifically, it is a business of customizing infrastructure borrowed from a communication carrier into a service to meet the needs of customers. s you pointed out, the profitability is not likely to be very high. The other category is a high-speed, large-data, secure IoT platform that we plan to use as the core of our services. This is a business model of building our own infrastructure and delivering it to customers. We expect high profitability since there is no purchasing from a communication carrier.

4 Q5 Please tell us the progress of the business of LTE-X, the subsidiary founded in September 2016, and the status of the recruitment of the president through the acceptance of applications from the public. The progress of the system development at LTE-X has been in line with the plan, and the preliminary sales activities ahead of launching the service have also been going well. We now expect the growth of this business to exceed our forecast when we founded the company. The test bed has already been completed, and we have been selecting partner companies by showing them a demo system. We should be able to start providing revenue-earning services from pril this year. In the FY2017 plan, we expect to receive sales from LTE-X in the second half of FY2017. s for human resources, we have received applications for the positon of the president of LTE-X from exceptionally qualified people. Not only the president, but also many excellent applicants with technical or marketing expertise and other skills remain as finalists following the screening, and the progress of the process has been very smooth. Questioner 3 The reference material indicates three items of operating expenses in the plan for the fiscal year ending December Please tell us the specific amount of each of the three or the order from the largest amount among the three. We are sorry, but we are not able to disclose the amounts or the order. Operating income for the fiscal year ended December 31, 2016 was 1,250 million yen, and the forecast operating income for the fiscal year ending December 31, 2017 is 650 million yen. large part of this difference can be considered cost factors. Q2 Regarding increased costs, which has the greater impact, cost of goods or SG& expenses? We assume that the impact of SG& expenses is greater.

5 Q3 Please tell us about your medium-term business plan. In the plan for the fiscal year ending December 31, 2020, the range of consolidated net sales is between 15 billion yen and 20 billion yen, and the range of operating income is between 2 billion yen and 3 billion yen. What is the composition of the B-to-C business and the B-to-B business? In the fiscal year ending December 31, 2020, which is the final fiscal year of our medium-term business plan, we believe that our B-to-C business will be able to achieve operating income that is mostly at the same level as that in the fiscal year ended December 31, The ranges you have mentioned will depend on how much growth the B-to-B business can achieve. Please consider that, for example, if operating income is at the minimum level of 2 billion yen, the operating income of the B-to-B business will be 0.8 billion when that of the B-to-C business is 1.2 billion yen. If operating income is at the maximum level of 3 billion yen, the operating income of the B-to-B business, 1.8 billion yen, will be added to that of the B-to-C business, 1.2 billion yen. ccordingly, an increase in future operating income in the medium-term business plan is related to how much we can grow our B-to-B business, and we consider the LTE-X business to be a particularly significant contribution factor.