May 14, 2019: FY2018 Results Briefing
(*) This is a summary of questions and answers took place at the Briefing.
- Question: Major MNOs（Mobile Network Operators）have announced their new price lists. Please give us your comment on how IIJ is going to react.
- Answer: Major MNOs' new price lists of so-called "40% drop" are offered if a contract meets multiple requirement such as 1GB bundled data volume, minimum contract period of 2 years, and contract unit as family. Therefore, in terms of price comparison, Mobile Virtual Network Operators (MVNO) offering price lists are much more competitive (IIJ: 3GB bundled data volume for 900 yen. IIJ's mobile strategy is to execute direct sales, sales partners and MVNE strategies for consumer and achieve stronger accumulation of traffic and revenue of enterprise IoT and comprehensive mobile project to which IIJ has strong competitive advantage.
- Question: What is IIJ's plan for 5G?
- Answer: As an MVNO, we would need MNOs to provide their 5G infrastructure. We'd like that to be soon so that we can apply 5G to our services and we hope to lead the market with new innovative services and solutions. As for local 5G which is said to be more industry or region specific, we would like to have many options and potential open as many players are interested in incorporating. We believe we can support them effectively with our various and reliable network services.
- Question: What is your view on NTT Docomo’s unit price revision of March 2019 which was a decrease of 5%.
- Answer: The current mechanism to decide unit price charge has some issues. First of all, it takes a long time to finalize a new unit price and usually it is fixed at the end of March, our fiscal year end month. As for this issue, adoption of "future cost method" has been discussed at the Ministry of Internal Affairs. Another issue is lack of transparency in calculation. The calculation formula itself is a public information, yet details as well as figures that are used for "demand" and "profitability" are not clear from the point of MVNO's view. Transparent disclosure and evaluation by a third party are needed.(*1)
- Question: FY2018 full-MVNO revenue of JPY0.7 billion exceed the initial target. Please give us your comment on IIJ's focused areas for IoT projects.
- Answer: Current demands are mainly prepaid SIM(*2)for foreigners vising japan and surveillance camera. In addition to these demands, we’d like to promote IoT usage in fields such as agriculture, fishery, factory, and manufacturing where our competitive advantage of having necessary elements for IoT is a very strong differentiation point.(*3)IoT has just began and we hope for further penetration.
- Question: Please give us your comment on cloud services business developments as well as competitive landscape.
- Answer: While there are domestic cloud providers who invest in system per client and charge par monthly, there are not many genuine cloud service provider like IIJ who procure cloud service facility and charge client per usage. Global cloud service providers are quite strong in Japan these days. Yet this leads to some worrisome issue that Japanese companies' various data are stored at foreign companies' infrastructure. IIJ’s strategy is to provide highly value-added and reliable private cloud service line-ups to capture Japanese companies' demands which efforts have been translated to revenue growth results. （FY2018 cloud related revenue grew by 12.2% year over year）Also, our Unified Operation Management Service has been attracting orders along with trend of multi cloud in which a single system is composed by on-premise system, our cloud services, and third vendor cloud services.
- Question: According to IIJ's disclosure, FY2019 WAN service revenue is expected to decrease. Will the decrease be visible from first half?
- Answer: FY2019 WAN service revenue is planned to decrease by JPY4 billion mainly due to existing large clients' migration to mobile. The impact will become large quarterly as migration will take place sequentially.
- Question: Please give us your comment on overseas business outlook.
- Answer: Our overseas business turned positive in FY2017, and Asian subsidiaries as a whole turned positive in FY2018 accordingly with initial plan. We aim to achieve revenue of JPY10 billion soon by further expanding network services, cloud services and SI. Demands related to General Data Protection Regulation (GDPR) is a tailwind. As a first runner in providing related consultation services, we receive many sales inquiries and we expect the business to develop into data management area.
- Question: In March 2019, DeCurret Inc. (IIJ's affiliated company with IIJ ownership 35%) became the first and new licensed service provider after registration process was enacted. How big is their business now?
- Answer: As disclosed in IIJ's consolidated financial results, FY2018 equity in net loss of DeCurret was JPY0.5 billion. As for FY2019, we expect it to be JPY0.7 billion of loss. DeCurret launched cryptocurrency exchange services in April 2019 and plans to upgrade the service and launch settlement services in the first half of FY2019. Along with their business expansion, we expect the loss to be larger in the first half and smaller in the latter half. DeCurret’s future plan has not been changed significantly from the inception of the company(*4)
- Question: Please give us your comment on business developments of JOCDN Inc., IIJ's affiliated company .
- Answer: In addition to existing shareholders of 15 Japanese major broadcasting companies, WOWOW Inc. , a prominent private satellite braodcaster in Japan, became a shareholder in April 2019. We expect distributing contents of broadcasting companies as well as large contents distributers over Internet should increase.