Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

NTT (Nippon Telegraph & Telephone) / Equity Bottom-Up

<ul>
<li>Segment results for DoCoMo and NTT Data were impressive as NTT plans to restructure both businesses start to bear fruit</li>
<li>DoCoMo is also leading MNOs in moving past the impact of regulatory driven price reductions with Q3 service revenue largely flat YoY supported by 5G upsell and subscriber wins</li>
<li>Rising utility costs have had a material impact on profitability for NTT East and West but management believes upside in other areas and cost discipline provides some offset</li>
</ul>


Segment results for DoCoMo and NTT Data were impressive as NTT plans to restructure both businesses start to bear fruit
DoCoMo is also leading MNOs in moving past the impact of regulatory driven price reductions with Q3 service revenue largely flat YoY supported by 5G upsell and subscriber wins
Rising utility costs have had a material impact on profitability for NTT East and West but management believes upside in other areas and cost discipline provides some offset


NTT (Buy) - Q3 22 Results Reaction: Mixed Quarter but Solid Mobile/Data Performance

<ul>
<li>Consumer mobile revenue fell 7% but that partly reflects how sales were reported a year ago. Reported ARPU was down 5% whilst price cut erosion narrowed</li>
<li>Operating income YTD is 94% of full-year targets leaving room for Softbank to achieve its goal even with increased investment spending</li>
<li>This was a relatively uneventful quarter and we remain at Buy</li>
</ul>


Consumer mobile revenue fell 7% but that partly reflects how sales were reported a year ago. Reported ARPU was down 5% whilst price cut erosion narrowed
Operating income YTD is 94% of full-year targets leaving room for Softbank to achieve its goal even with increased investment spending
This was a relatively uneventful quarter and we remain at Buy


Softbank Corp (Buy) - Q3 22 Results Reaction: Modest Mobile Improvement, on Track to Meet Targets

<ul>
<li>Core mobile revenue fell 4% but that is an improvement from 7-8% declines over the last few quarters and including value-added sales (VAS), retail mobile spend is up</li>
<li>Competitive challenges remain with elevated churn and visible declines in roaming revenue from Rakuten (although sequential change has been modest)</li>
<li>KDDI has kept guidance for FY22 operating income growth unchanged despite unanticipated expenses for rising fuel costs and the July network failure</li>
</ul>


Core mobile revenue fell 4% but that is an improvement from 7-8% declines over the last few quarters and including value-added sales (VAS), retail mobile spend is up
Competitive challenges remain with elevated churn and visible declines in roaming revenue from Rakuten (although sequential change has been modest)
KDDI has kept guidance for FY22 operating income growth unchanged despite unanticipated expenses for rising fuel costs and the July network failure


KDDI (Buy) - Q3 22 Results Reaction: Super Mobile but Full-Year Targets Look Challenging

Thematic (Sector/Industry)

<ul>
<li>Japan trails global peers in the proportion of payments that are cashless but it is starting to close the gap led by Internet and telecom companies</li>
<li>Rakuten is a fintech leader in Japan (15% of cashless payments) but PayPay is closing the gap as it ramps up cashless app users</li>
<li>We expect compound annual growth in the mid-teens but margin expansion will be limited by competitive intensity</li>
</ul>


Japan trails global peers in the proportion of payments that are cashless but it is starting to close the gap led by Internet and telecom companies
Rakuten is a fintech leader in Japan (15% of cashless payments) but PayPay is closing the gap as it ramps up cashless app users
We expect compound annual growth in the mid-teens but margin expansion will be limited by competitive intensity


Japan Fintech - Cashless Payments Competition Is Heating Up

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Mitsui&amp;Co has been in <a href="https://www.smartkarma.com/entities/relia-inc" target="_blank" data-smartkarma-citation="entities:16219:1" rel="noopener">Relia Inc (4708 JP)</a> for a long time. As part of investing in BPO/RPA/AI services, they are buying out Relia, merging it with a KDDI sub.</li>
<li>They are buying it at an all-time high, and a 50% premium. Looks nice. But it's not nice enough.</li>
<li>This is one of those times when I can reiterate, <a href="https://www.smartkarma.com/insights/japan-needs-more-cowbell" target="_blank" data-smartkarma-citation="insights:41191" rel="noopener">Japan Needs More Cowbell</a>. </li>
</ul>


Mitsui&amp;Co has been in Relia Inc (4708 JP) for a long time. As part of investing in BPO/RPA/AI services, they are buying out Relia, merging it with a KDDI sub.
They are buying it at an all-time high, and a 50% premium. Looks nice. But it's not nice enough.
This is one of those times when I can reiterate, Japan Needs More Cowbell. 


Mitsui & Co To Buy Out Relia (4708) - Moshi Moshi Is TOO CHEAP

Japan

KDDI CORPORATION provides mobile communication services and sells mobile devices.  The Company also is a broadband provider.

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KDDI Corp (9433 JP)

NTT (Buy) - Q3 22 Results Reaction: Mixed Quarter but Solid Mobile/Data Performance

Operating profit was light versus expectations on rising electricity costs but solid results for DoCoMo and NTT Data should be the focus

Kirk Boodry

Softbank Corp (Buy) - Q3 22 Results Reaction: Modest Mobile Improvement, on Track to Meet Targets

On balance a good quarter with solid progress to year-end targets. Headline mobile erosion was higher than we expected but ARPU declines were in...

Kirk Boodry

KDDI (Buy) - Q3 22 Results Reaction: Super Mobile but Full-Year Targets Look Challenging

Mobile revenue erosion appears to be improving but unanticipated costs for rising fuel costs and the July network failure stand in the way of FY22...

Kirk Boodry

Japan Fintech - Cashless Payments Competition Is Heating Up

Japan telecom and Internet companies are driving growth in cashless payments led by Rakuten in credit cards and PayPay in cashless apps. This is a...

Kirk Boodry

Mitsui & Co To Buy Out Relia (4708) - Moshi Moshi Is TOO CHEAP

Mitsui is buying out Relia (4708) formerly known as Moshi Moshi Hotline. It is an all-time high and big premium, but it is the wrong price. But...

Travis Lundy

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