OKINAWA CELLULAR TELEPHONE COMPANY Q4 FY2025 earnings call

Overall Financial Results

• Achieved increased revenue, increased profit, and 24 consecutive years of dividend increases (the "three increases" core management policy), with a planned payout ratio of 47.6%, exceeding the 40%+ payout ratio target. Operating revenue and operating profit both exceeded the revised forecast, marking three consecutive years of record-high performance.
• Net income growth appears lower due to a reduced investment tax credit, a reversal from the prior year when the completed inter-island submarine cable qualified for special Okinawa promotion investment tax breaks.

Mobile Operations

• Despite intense competitive pressure from rivals that created a challenging operating environment, operational efficiency improvements and strengthened sales initiatives allowed the company to secure 12,500 net new mobile contracts. The Q4 churn rate rose to 1.37%, which management identifies as a key area for improvement.
• Communication ARPU turned positive full-year after mid-year declines, driven by favorable year-over-year access charge settlement adjustments in Q4; excluding roaming revenue (which saw a reversal from prior year strength), communication ARPU grew sequentially and year-over-year through the second half. Value-added ARPU grew steadily, led by terminal protection services boosted by AppleCare price increases.

Growth and New Initiatives

• A 10Gbps FTTH service, the first of its kind in Okinawa Prefecture, launched in April 2025 and is off to a strong start, with plans to continue expanding the service.
• The solutions business, the company's core growth focus, secured multiple large municipal DX and corporate client projects, and achieved its 3-year mid-term target of growing revenue from 10 billion yen to 15 billion yen one full 3-year plan cycle.
• 10Gbps FTTH service launch after period end is off to a strong start.

ESG and Community Engagement

• The company partnered with Okinawa Financial Group and Okinawa Electric Power to sign partnership agreements with 10 remote island municipalities, with a combined total donation of 90 million yen to support municipal public finances, entering the implementation phase to solve remote island regional challenges.
• The third annual Okinawa Cellular Thanksgiving 2025 event was held at company headquarters, attracting over 2,100 attendees with high satisfaction, strengthening community connections.

Shareholder Return

• The year-end dividend was revised upward from 60 yen to 64 yen, bringing full-year dividend per share to 124 yen after shareholder approval, extending the streak of consecutive annual increases to 24 years.
• The company repurchased 5 billion yen in own shares between May 2024 and March 2025, all of which will be retired in May 2025 to improve capital efficiency. A new repurchase program of up to 5 billion yen was announced for the 2026 March fiscal year, with all acquired shares to be retired.

Mid-term Plan Completion

• All targets in the 2023-2025 mid-term management plan were achieved, and management will launch a new mid-term plan to sustain growth momentum.

1. Telecommunications Business: Revenue increased 179 million yen year-over-year, contributing 2.8% of the total 6.323 billion yen YoY revenue growth. Total ARPU revenue was 44.213 billion yen, up 582 million yen YoY: communication ARPU revenue was 36.801 billion yen (up 97 million yen YoY, turning positive after two quarters of decline), and value-added ARPU revenue was 7.412 billion yen (up 484 million yen YoY, +8.2% YoY). Mobile total contracts reached 690,200, with a net increase of 12,500 contracts; handset sales volume was 155,400 units, up 1,300 units YoY. au 5G penetration reached 77%, up 10 percentage points YoY. FTTH total lines reached 129,100, with a full-year net increase of 4,800 lines exceeding the revised forecast. 2. Ancillary Business: Revenue increased 6.144 billion yen YoY, contributing 97.2% of total YoY revenue growth. Within this, au Denki sales increased 2.37 billion yen YoY, and other ancillary revenue including handset sales and solutions increased 3.774 billion yen YoY. au Denki total contracts reached 77,200, with a full-year net increase of 2,200 contracts, with sequential net decline in the second half due to constrained sales activity. Solutions business revenue grew 24% YoY, hitting the 15 billion yen (150 billion yen scale before conversion correction, 15 billion yen after conversion: original 150億円 = 15 billion yen) revenue target three years after setting the goal to grow from 10 billion yen. 3. Consolidated Full-Year: Total operating revenue was 84.314 billion yen, up 6.323 billion yen YoY; operating profit was 17.761 billion yen, up 747 million yen YoY; ordinary profit was 17.927 billion yen; net income was 12.402 billion yen; EBITDA was 24.666 billion yen.

• For the 2026 March fiscal year, management forecasts continued revenue and profit growth: total operating revenue is projected at 85 billion yen, up 686 million yen YoY; operating profit is projected at 18.2 billion yen, up 439 million yen YoY; ordinary profit is projected at 18.25 billion yen; net income is projected at 12.55 billion yen; EBITDA is projected at 24.9 billion yen, all showing year-over-year growth.
• Projected free cash flow is 11.1 billion yen (8 billion yen excluding related company lending changes); capital expenditure is planned at 6.9 billion yen, driven by equipment upgrades and 10Gbps FTTH expansion.
• Operational forecasts target 10,000 net new mobile contracts, 4,000 net new FTTH lines, and 4,400 net new au Denki contracts. au Denki sales activity will be actively resumed in the 2026 fiscal year as improved profitability is expected after 2025's cost-driven sales pause.
• Full-year dividend per share is projected at 128 yen, with 64 yen for both interim and year-end dividends (holding the year-end dividend at the newly revised 2025 level). If achieved, this will extend the consecutive annual increase streak to 25 years. Management will continue strengthening shareholder returns via consecutive dividend increases and flexible own share repurchases.

• Intense competitive pressure from rival mobile operators created a challenging market environment in 2025, pushing the Q4 mobile churn rate up to 1.37% which management identifies as a significant ongoing challenge requiring enhanced churn mitigation efforts.
• au Denki experienced profitability deterioration in 2025 due to rising procurement costs, forcing the company to constrain sales activity through the second half of the year, resulting in sequential net contract declines during that period.
• Net income growth was suppressed in 2025 by the expiration of large investment tax credits from the prior year's inter-island submarine cable project, creating a year-over-year headwind that reduced the reported net income growth rate.
• Free cash flow declined 4.726 billion yen YoY in 2025, driven by a reversal from prior year TOB-related funding activity that increased investment cash flow in the prior period.

No question and answer section is included in the provided earnings call transcript.