9436.T

Mobile Operational Performance and LTV-focused Strategy

• Even amid intensifying competition in Okinawa Prefecture, mobile growth momentum recovered. The business reversed a net contract decline in the second quarter to achieve a net increase of 2,200 contracts in the third quarter, maintaining an upward trend in total contracts.
• Operational structure health improvements advanced: After introducing new pricing plans starting in the second quarter, the business reversed the previous trend of excessive customer migration from the au brand to UQ mobile. In the third quarter, au turned to net positive migration between brands, with more customers staying on au or migrating from UQ mobile to au.
• Churn rate improved across all brands: Promoting device bundles and plans that encourage long-term retention led to lower churn for the full multi-brand portfolio, the au brand, and the UQ mobile brand compared to the prior year period.
• These improvements are driven by LTV (lifetime value)-focused initiatives: New generation-specific pricing plans have been well received by customers; UQ mobile has reduced standalone SIM sales that drive high short-term churn and focused on sales to customers needing device bundles; need-aligned service bundling has improved customer convenience, satisfaction, and long-term retention, lifting overall brand appeal.
• Mobile total revenue grew 6.1% year-over-year, and expanded 2 percentage points compared to the second quarter, with accelerating growth. While overall full-year net addition progress is challenging, declines are concentrated in standalone SIM contracts, and management expects operational structure health improvements to have a positive impact on full-year communication ARPU.

Fixed-line and Energy Business Updates

• FTTH: New contract growth is accelerating alongside the recovery in mobile net additions. There is a time lag between new FTTH contracts and service activation due to required construction work. Management is working to shorten activation lead times to limit any negative impact of this lag on next fiscal year revenue. The company launched 10Gbps service for the NTT-collaborated ひかりゆいまーる service starting January 26, which complements the 10Gbps coverage of the company's proprietary ひかりちゅら service and enables 10Gbps coverage across the entire Okinawa prefecture. The company will rapidly expand 10Gbps service coverage.
• au Electric Power: Sales activities resumed in July after improving business profitability prospects, and the business reversed to net contract growth starting in the second quarter, with steady contract growth. Net additions are on track to hit the full-year target of 4,400 net new contracts, and management expects the net growth trend to continue through the fourth quarter. The October entry into full power retail has improved electricity business profitability, which contributed to full year profit growth.

New Business Initiatives in Business Solutions

• Digital signage: The company offers end-to-end solutions including large LED vision equipment installation, cloud-based video distribution, advertising distribution, and monitoring services, which have been well received by the market, and the company will continue aggressive sales outreach.
• Local government DX: The company introduced SIM-based security cameras that enable remote video access from government offices, eliminating the need for on-site data downloads for police requests and resolving existing operational pain points. Three local governments have already deployed the solution, and the company will expand deployments to drive further local government DX progress.
• Sports DX with AI cameras: Combining AI cameras with video analysis improves athlete skill development and adds value to sports facilities, helping attract training camps and tours for both professional and amateur athletes. Okinawa Prefecture is planning widespread facility renovations ahead of the 2034 National Sports Festival, and the company is strengthening its proposal capabilities to capture expected market growth.

Public Problem Solving Initiatives

• The AI on-demand mobility service "mobi" has steadily expanded its service area: After launching in Haebaru Town in 2024, the service will expand to 5 municipalities by next fiscal year. Usage in Haebaru Town has grown steadily since launch, with particularly high usage among non-driving seniors in their 70s and teenagers, helping address local mobility access gaps. Secondary mobility gaps are a common issue across most Okinawan municipalities, so the service is expected to grow long-term.

Corporate Brand Improvement Initiatives

• Starting in January, the company launched a new brand statement "All for Family" to more clearly communicate the company's long-standing mission of full commitment to the local Okinawan community, with the concept of "family" encompassing all the diverse community connections that bind Okinawan people together.
• First initiatives under the new brand include an Okinawa-specific version of the Ponta Pass app with an Okinawa-exclusive UI that shows locally available rewards first, and the company plans to expand the number of Okinawa-only rewards in 2026.
• The company also launched the mobile au Shop Car, a mobile store with two remote consultation booths to bring service to Okinawa's many remote islands and isolated regions. The vehicle hosts local events in partnership with collaborating companies to strengthen new remote-accessible services, with the goal of deepening connections with local residents and improving customer experience.

Communication Quality Improvements

• The company has received high marks for network quality from Opensignal's independent quality surveys. The company is rapidly expanding 5G Standalone (SA) coverage, and targets reaching over 90% population coverage for 5G SA by the end of March 2026.
• Starlink Direct service area in Okinawa has doubled in size, and the service is well received by customers. The expanded coverage provides stable connectivity in areas where ferry routes between islands previously had coverage gaps, enabling seamless connectivity across land and sea, and the company will promote the "peace of mind of connectivity" value proposition.

• Full-year performance is tracking in line with the original full-year business forecast, with both operating revenue and operating profit progressing as planned.
• Mobile net addition progress against the full-year forecast is 43% through the third quarter, with recent net growth momentum improving steadily, so management continues to target the full-year guidance.
• FTTH is already at 60% of the full-year net addition target through the third quarter, which is ahead of plan.
• au Electric Power continues to target 4,400 net new contracts for the full fiscal year, and management is confident of hitting this target based on current growth momentum.
• 5G SA population coverage is on track to exceed 90% by the end of March 2026, in line with prior guidance.

1. Mobile: Total mobile revenue reached 34.333 billion yen, an increase of 1.387 billion yen year-over-year, contributing 53.3% of total operating revenue. Total mobile contracts reached 694,500, with a net increase of 4,300 contracts from the previous quarter end, including a standalone net increase of 2,200 contracts in the third quarter. 2. Handset sales: Handset sales revenue increased 0.752 billion yen year-over-year, contributing 38.6% of the total year-over-year revenue growth. 3. auでんき (au Electric Power): au Electric Power sales decreased 0.257 billion yen year-over-year due to falling fuel adjustment costs. au Electric Power recorded a net increase of 2,200 contracts in the first nine months of the fiscal year, bringing total contracts to 79,400. 4. FTTH (Fiber to the Home): FTTH recorded a net increase of 2,400 contracts in the first nine months of the fiscal year, reaching 60% progress against the full year forecast. FTTH revenue is included in "Other revenue". 5. Other revenue (includes business solutions and FTTH): Other revenue increased 0.069 billion yen year-over-year. In aggregate, total operating revenue for the third quarter of FY2026 March was 64.36 billion yen, an increase of 1.951 billion yen year-over-year; operating profit was 14.35 billion yen, an increase of 0.618 billion yen year-over-year; net income attributable to the parent was 10.103 billion yen, an increase of 0.626 billion yen year-over-year; EBITDA was 19.233 billion yen, an increase of 0.351 billion yen year-over-year.

• Intense competitive pressure in the Okinawan mobile market continues, which creates headwinds for mobile contract growth targets.
• FTTH has an inherent time lag between new contract signing and service activation due to required construction work, which could lead to a small portion of new contracted revenue being recognized in the next fiscal year instead of the current fiscal year.
• The company has not disclosed any material operational failures or unexpected risks in the provided transcript.

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