Softbank delivered a strong beat on EBITDA and net profit this quarter, with mobile accelerating as the benefits of financial integration into mobile plans continued to flow through. Guidance was mixed however, impacted by the ¥150bn investments going into generative AI. As a result, compared to a scenario without these investments, the guided EBIT was lower by ¥30bn/year for FY24 and FY25, but in line with previous figures.
LY delivered yet another strong EBITDA beat, ahead of consensus by 16%. Against consensus expectations, FY24 guidance was in line for revenue while ahead on EBITDA. Encouragingly, the company has also laid out a bullish EPS target of more than ¥20 for FY25 (vs. ¥18.7 previously) which reflects the company’s focus on efficiency and profitability, and would be positive if the company can achieve it.
We ran our Asia Telco tour last week. This time we met 12 companies in 3 countries (Korea, Japan, Thailand). Telco share prices in all 3 of these countries have been pretty strong recently as telcos continue to benefit from generally positive themes: growth, return on capital and shareholder remuneration are all typically improving.
Service revenue trend was softer on slower non-mobile this quarter. Collectively, mobile revenue trend (Consumer + Enterprise) maintained its second consecutive of growth and operators are implying a strong Q4. For instance, Softbank is expecting Consumer MSR to rebound this year (at flat YTD); NTT implying a strong Q4 EBIT on cost reductions and streamlining of non-core assets like Real Estate.
Wireless spectrum is one of the most valuable commodities in the telecoms market. Japanese telcos have previously been issued spectrum for free. But what if it starts to be auctioned? In this note, we use our new proprietary SpectrumHub Global Database to calculate the likely cost of mmWave spectrum in Japan. We also look at the total value of all spectrum held by the incumbents, to address the implications if Japan were to move to auction for all spectrum.
Something significant has shifted in Japan. The telcos, and especially KDDI and SB Corp are now using their strength in financial services to drive customers towards unlimited offers. The result is likely to be an acceleration of ARPU recovery, and suggests we are at an important inflection point. We lift ARPU forecasts and price targets. SoftBank Corp is our new top pick, PT ¥2,500, from ¥2,200.
Japanese telcos delivered better service revenue growth in Q2, driven by an inflection in mobile and non-mobile segments. Mobile performance for KDDI and Softbank were very encouraging, with the former hitting inflection on both mobile revenue (expected) and ARPU growth (earlier than expected) while Softbank witnessed an earlier than expected bottoming of MSR and upgraded its full year ARPU guidance from ¥3,680 to ¥3,720. Across the board, EBITDA trend was also better.
Softbank Corp recorded a strong EBIT beat again, driven by strong numbers across the board. Group revenue was slightly ahead of expectations, with mobile service revenue flat for the first time and bottoming earlier than expected.
Softbank Corp reported in-line Q4 revenue and a 2% EBITDA beat. The slowdown in revenue was driven by a decline in Consumer business associated with mobile ARPU decline (-5%) despite being marginally better against last quarter’s decline (-5.2%).
Japanese telcos have seen declining mobile ARPU since the introduction of cheaper price plans two years ago. However, in Q2, ARPU inflected as upselling – 4G to 5G and featurephone to 4G started to offset migration to cheaper brands. In this important note, we have estimated cohort ARPU by brand and usage and from migration trends can calculate the likely direction of ARPU. Instead of the L-shaped recovery as projected by consensus, our work suggests that mobile ARPU is set to inflect rapidly an...
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