KDDI Corporation (OTCPK:KDDIY) Q3 2022 Earnings Conference Call January 28, 20223:30 AM ET
Company Participants
Ikuko Hongou – General Manager, Investor Relations
Takashi Shoji – Executive Director, Personal Business and Global Consumer Business Sector
Shinichi Muramoto – Executive Director, Corporate Sector
Keiichi Mori – Executive Director, Solution Business Sector
Kazuyuki Yoshimura – Executive Director, Technology Sector
Conference Call Participants
Yoshio Ando – Daiwa Securities Co., Ltd.
Daisaku Masuno – Nomura Securities Co., Ltd.
Hideaki Tanaka – Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Shinji Moriyuki – SBI SECURITIES Co Ltd.
Mr. Hongou – Citigroup Securities
Kikuchi Shun – Distant Lands Coffee
Ikuko Hongou
[Interpreted] Thank you very much for waiting. We will now begin the financial results briefing of KDDI Corporation for the Third Quarter of the fiscal year ending March 31, 2022. Thank you very much for taking time out of your busy schedule to join us today via the internet. I am Hongou of Investor Relations Department and will serve as the moderator today. In order to prevent the spread of COVID-19, this briefing will be broadcast live on the internet, with simultaneous interpretation in Japanese and English. The presentation will be available on demand on our IR website at a later date. Thank you for your understanding in advance. Let me introduce the participants today. Shinichi Muramoto, Executive Vice President and Executive Director of Corporate Sector. Takashi Shoji, Executive Vice President and Executive Director of Personal Business Sector. Keiichi moody, Senior Managing Executive Officer, and Executive Director of Solutions Business Sector. Kazuyuki Yoshimura, Managing Executive Officer and Executive Director of Technology Sector. Nanae Saishoji, Executive Officer and General Manager of Corporate Management Division. Three financial results with any of materials, the presentation, [Indiscernible] quality -- quarterly report, and detailed materials, and two TSC disclosure materials, a total five documents are posted on our IR website. Please refer to the disclaimer in the material regarding statements made in these documents, performance targets, and projected subscriber numbers explained in the Q&A session today, Mr. Muramoto, we'll first explain the financial results, followed by Q&A. Mr. Muramoto, please.
Shinichi Muramoto
[Interpreted] Thank you so much for joining us in KDDI 's financial results, meeting out of your busy schedule. Let me share with you the financial results for the third quarter of the fiscal year ending in March 2022. First, the consolidated financial results for the first -- through the first quarter for the term ending in March 2022 and various KTIs. The right, the operating income was ¥874.60 billion. Progress ratio versus full-year forecast was 83.3%. Brisk progressed against the full-year forecast. Next, let me explain factors for change from the first through the third quarter regarding consolidated operating income. From the left, multi-brand communications. ARPU revenue declined by ¥56.4 billion.
While group in the NOO and to roaming revenues contributed to a ¥7 billion increase of mobile communications revenues. In addition, the Life Design Domain and Business Services segment that are Growth Field enjoyed an income growth of ¥16.8 billion, mobile communications revenues and growth fields contributed to an increase of ¥3.5 billion in total. The third quarter for the transient income increase with a decrease of reserve among others. From the beginning, we're forecasting a significant growth in the fourth quarter in Growth fields with a robust progress versus full year forecast. Next to own Group IDs. To left, the group ID's turned to two, a net increase in the third quarter reaching 31.56 million IDs. Even in the full-year basis, cumulatively through the third quarter, it's a net addition of 48,000 units. Going to the right, momentum was recovered because the multi-brand strategy moves to forward steadily. Plus, for AU, with expansion of 5G areas. 5G unit sales steady rate increasing. Regarding UQ Mobile discount with Denki electricity and the internet that started in the first half and handling at all and your stores are showing an effect. Regarding povo from zero in our own way, povo 2.0 was launched at the end of September, which is diffusing among highly active digital natives with a new usage. NEXT on 5G units, the left tissues cumulative 5G unit sales, which is enjoying a steady growth with 6.2 million units at the end of December as 5G area expansion and the new iPhone sales timing worked out well.
By the end of March 2022, we aim for 8 million units. The right shows mobile data traffic, per person for 5G, which is more than 2.5 times better than 4G, showing an expansion of data demand. Next on multi-brand communications ARPU. The left shows the third quarter communications ARPU, which was down 240 years on year out ¥4.2 thousand. Moving to the right, regarding ARPU factors for change, the number of subscribers who remain with the au is more than expected, together with a contribution by 5G effect. And on the other hand, a subscriber increasing due to mobile improvable, has been anticipated from the beginning and this within the expected range. As for the full year, we would like to reach to target ¥4,200 and continue to operate our operation to land there. This shows the performance of growth fields from the first through the third quarter. The left, the operating income of Life Design Domain is we're ¥181 billion with a 72.4% progress ratio. Right shows Business Services segments operating income of that is ¥141.7 billion.
The progress ratio versus full-year focus is 77%. Both the expected of a significant increase in income making a good progress towards the full-year forecast. Next, on Life Design Domain KDDI 's customer base of core services are steadily expanding. Of Life Design Domain performance and let me touch upon the impacts by the energy business. In the last half to -- owing to -- owing in the -- last term, owing the price fluctuations in the wholesale electricity market from the first through the third quarter, we enjoyed higher profits. During the fourth quarter, profitability suffered due to soaring cost, our performance had ups and downs. In this term, in order to control cost, we raised the ratio of private and step-up procurement from local energy companies’ vs procurement from the wholesale electricity market. Against the backdrop, while the income dropped to year-on-year from the first two through the third quarter, we anticipate a big increase in profit in the fourth quarter. We will continue to monitor the environment of the wholesale electricity market.
Next, I will talk about the sales in the Business Services segment. The NEXT Core Business, which is driving growth, achieved double-digit growth of 17% year-on-year. Next is topics. This is au 5G network under the slogan
Connecting more and always with au. We aim to create a secure and reliable network focusing on areas of high customers’ concentration. On the left, to introduce 5G in railroad lines, we aim to expand our coverage to 26 routes, including GR and private railway lines by the end of this fiscal year. On the right side, we strengthened the DX of our operation center to ensure stable operation of the network. We will offer automated monitoring at two locations, east and west for peace of mind that we are connected even in times of disaster. Next is our collaboration with OTT partners On the left, you can see that the intention to use video content in 5G is steadily increasing. In response to such customer needs, we have further expanded the OTT partner services, leading in entertainment as shown on the right. We will continue to leverage our partnering strength to meet customer expectations.
Next is Metaverse on experience unique 5G. On the left, we have been building up use cases ahead of other companies for about two years through collaboration with local governments and tourism associations rooted in the community. In October 2021, the HalloweenFes held in Virtual Shibuya attracted over 500 thousand visitors, in total. Most recently, Virtual Osaka was launched and collaboration with real cities is expanding. As shown on the right side, we launched Virtual City Consortium, with the aim of developing guidelines for secure use of Metaverse. Based on our extensive track record, we will continue to lead the standardization in the industry.
Next is a new mobility business. With the concept of transforming mobility into exciting experiences, we will work with our partners and connect people, products, and things in cities and rural areas to solve social issues. Lower left. Mobi, a short ride service within two-kilometer radius will be provided jointly with WILLER. With more flexible mobility, we will work to solve issues such as regional mobility and contribute to regional revitalization by supporting increased opportunities for going out and community interaction. Lower right. We established a new company, KDDI SmartDrone as a spin off venture from KDDI Corporation. Details of the business will be announced in February.
Next is the expansion of connected services. The strength of KDDI's global communication platform is its integrated management of different communication lines in each country to provide high-quality and stable communications. Upper half shows that KDDI is expanding the supply to nurture Japanese automobile manufacturers, including Toyota, Subaru, and Suzuki. In addition to Japan, the deployment area has expanded to five regions around the world, including Europe, China, Australia, and North America, as shown at the bottom of the slide. Next is the Global Data Center. On the left, TELEHOUSE strengths is its high connectivity, where telecom carriers and MYGA cloud operators are integrated in the resilient and high-quality datacenters to form a robust ecosystem. In London, TELEHOUSE is number one in the world, in terms of connectivity, and in Paris, it is number one in France. As shown on the right, we will expand our success cases in Europe into Southeast Asia, with plan to build TELEHOUSE Bangkok, in the spring of 2023.
Lastly, today's summary, regarding financial results and KPIs, first to third quarter results show steady progress. Promotion of 5G and multi-brand strategy resulted in net increase of Group ID. Growth Fields is progressing steadily and profit is expected to increase significantly in the fourth quarter. Regarding topics, we are driving forward, entertainment in the 5G era with video content and Metaverse, contributing to the resolution of social issues through new initiatives in the mobility field, promoting NEXT Core Business (NYSE:DX) by leveraging the strength of global businesses, including connected cars and data centers, and expanding our share buyback facility by ¥50 billion. We promoted new initiatives in addition to multi-brand strategy. Thank you very much for your kind attention.
Question-and-Answer Session
Operator
Now, we would like to entertain your questions. To entertain as many questions as possible for many of you, we would like to limit questions to two questions per person. If you have two questions, wait for the answer to your first question, and then ask your second question. As we informed you already, we would like to entertain questions from those who have been registered and connected to the system one by one. [Operator Instructions] We will be entertaining questions until the closing time. Those of you who have questions, please raise your hand. The first question is Shienbishiniku(ph), Kikuchi san. Please tap it and then raise your question, sir.
Kikuchi Shun
[Interpreted] Kikuchi speaking can you hear me?
Operator
Yes, you are on. Thank you.
Kikuchi Shun
[Interpreted] Regarding my questions. First -- my first question about migration situation. I would like you to inform us about the migration. Currently, what's the progress? Under the fourth quarter, with some -- if there's concentration of migration in the fourth quarter that might incur some costs. What's your outlook? And also, regarding this migration, customers might actually chip -- there might be customer churned. So what about the situation? So that's my question number one, on migration.
Shinichi Muramoto
[Interpreted] May I? Kikuchi Shun, thank you for your question. 3G migration, I think you would like to know the progress and also towards the fourth quarter, what about the cost? What about the churn? What's our outlook? Those are the questions. Personal business, Saishoji will answer your questions. Allow me to address your question about migration. For the positive few years we've be working on this, to give you a conclusion first. Just according to the enhanced plan, it's right on track, that's the conclusion. You calculate, you can see 1.1 million units are still remaining, approximately. It would almost, as expect as planned. And in the fourth-quarter, to 4G into 5G, how best we can migrate those customers, we are working very hard on this.
Kikuchi Shun
[Interpreted] Now, making it zero would be impossible, so what will be the final figures?
Shinichi Muramoto
[Interpreted] Excuse me, we are not really disclosing the numbers. I hope you'll understand. But we would like customers to migrate to 4G and 5G as much as possible. As for the migration cost, as we already informed you on several occasions in this meeting, accelerated depreciation, facilities-related cost, and also sales-related cost. Facilities-related cost, it's been flat for each quarter it's been expensed. As for sales and operation expenses, I think that will come in the fourth quarter. On the full-year basis, it's about ¥30 billion but we anticipated that much cost.
Kikuchi Shun
[Interpreted] Thank you.
Shinichi Muramoto
[Interpreted] I hope I answered your question. Thank you very much.
Kikuchi Shun
[Interpreted] It's not going to be zero. Regarding such users, those remaining 3G users automatically, will that be counted us churn, right?
Shinichi Muramoto
[Interpreted] That is correct. I mean, all sorts of ways I used in newspaper and also individually, we approached to customers and news releases using newspapers. We have been doing many things, making direct calls to customers, and sending letter and various other methodologies have been utilized too. And still, there are still some numbers, some people who will be left.
Kikuchi Shun
[Interpreted] Understood. My second question, regarding the depreciation cost to year on year, first quarter -- compared with first quarter and second quarter it lowered. And in the third quarter is a factor for the increase to income. Now, 3G -- together with the 3G termination, regarding the depreciation cost, compared with the first half has declined. Is that the factor? Or are there any other factors behind this? Also, CapEx facilities investment in the first half, there was preparation going on and on the full year forecasted, it seems that it's actually higher. But in the fourth quarter, next term and onwards, how are you going to control facilities investment too. And what about the depreciation costs? The depreciation, 3G termination, together with that, the accelerated depreciation impact included, could you give me some more information?
Shinichi Muramoto
[Interpreted] Thank you. First of all, depreciation, Shoji will address your question.
Takashi Shoji
[Interpreted] Thank you for your question. Regarding depreciation cost, as for the decrease on the depreciation cost, allow me to address that part. On the fixed assets, for every fiscal year, the actual situation is looked at. Whether we need to change the number of years for depreciation that's been scrutinized. Regarding this fiscal year, currently, compared to the service years beyond certain years it's really been utilized for such assets compared with other years. We did scrutinize them even more. And as a result for those facilities that have exceeded those particular lines, particularly on the towers or the line facilities or power line facilities for some of them, we are reviewing the service line years -- service live years. Recently, from of the first two quarter, beginning of the term, the service years was to be changed. But because we spent so more time for investigation in the third quarter, for the first quarter to the third quarter, a depreciation cost was dropped.
Kikuchi Shun
[Interpreted] That's the case. On the third quarter to the first quarter, second quarter, depreciate -- decrease is included, which means fourth quarter and onwards, compared with the third quarter, that will be higher. Am I correct in assuming that?
Takashi Shoji
[Interpreted] That's right. In the third quarter, for three quarters depreciation, decline was listed for the full two quarters to there was more degrees. But in the fourth quarter, that will be just for the single-quarter meet compared with the third quarter is likely to be increased. Thank you. About the facilities investment CapEx as is pointed out compared with the plan, it's a little higher in terms of the progress ratio. If you look at the actual payment. On the full-year basis, we would like to control rate to as much as possible. But in the final analysis, there might be a possibility that will be, might be higher. Next tournament on words, depreciation we will really have an effective CapEx to sales, is something we would like to monitor carefully, and we would like to control it. I hope you will feel rest assured.
Kikuchi Shun
[Interpreted] Thank you. Regarding factors. Compared with other companies, I think I know it's a meaningless exercise DOCOMO and SoftBank. We don't know how they will end up with. But starting from distant, the plan is to grow at a CapEx. Not much changed. That's what according to what they said. And then in your case, what are you doing that result in higher CapEx higher than the plan? What are the factors? And then, the next term under results, what's going to happen? This is an additional question.
Takashi Shoji
[Interpreted] Yoshimura - san?
Kazuyuki Yoshimura
[Interpreted] Yoshimura speaking. Regarding the total investment amounted has gone up, 4G investments that declined, 5G, the basis investment increased. Regarding this next term, there was obviously 5G investment will continue. Regarding the investment, sharing 4G facilities, assets could be utilized. We've later lower the overall cost and keep making efforts. As for the major factor for the increase, the 5 GT facilities, investments that's significant. Thank you.
Operator
[Interpreted] Thank you very much. Moving onto the next question. Next is Nomura Securities Daisaku Masuno. Mr. Masuno, please tap and ask your question, please.
Daisaku Masuno
[Interpreted] Can you hear me?
Operator
Yes.
Daisaku Masuno
[Interpreted] I have two questions. First, it's a bit long story, but mobile communication, service revenue. The future trend of this revenue. So one point is ID number is trending very strongly. So the sustainability, this is a structural factor. So I think it will continue. So your sustainability in ARPU UQ mobile is growing with the discount with Electricity and
internet, so that is one factor. And au, so the data unlimited plan max, that is proportion is 60% or 70%? I think that it is very high level. But the au support discount is also supporting that. And maybe the 6-month discount will be gone in April NEXT. So will they stay in the unlimited use plan and continue using that plan? Are you anticipating that to happen? Because I think that could happen. So that is my first question.
Shinichi Muramoto
[Interpreted] Thank you very much, Mr. Masuno. ID and ARPU relationship is the question, so Shoji - san will explain.
Takashi Shoji
[Interpreted] Thank you for the question. Let me explain. So ID, as Mr. Muramoto said, we grew strongly in the third quarter. On the other hand, ARPU is in line with our internal plan. So our target this year is ¥4,200. And towards this target, we are hoping that we can end at this level. So, Mr. Masuno, your question was on ARPU, will -- could decline because UQ is growing. First of all, the answer is, yes. In our internal plan, more people are staying in au than we thought. More than we anticipated. But on the other hand, for UQ and povo the momentum, there's a big momentum and the number of their, grew as well, so this is impacting ARPU. And therefore, how this will be going forward? Needless to say, we will maintain this momentum and increase the number of ID and for ARPU, this au unlimited use max, these upper plan, we will try to attract the users to these upper plans so that M and L, these upper plans, will be selected by users as much as possible. However, as mentioned in the presentation, the traffic growth and 5G device performance and contents, given these factors, the traffic will grow significantly. So we will inform this to our customers and make -- do our best effort so that they will select the upper plan.
Now, in terms of sustainability, I think you mean how, what the ARPU revenue will look like in the future. It's hard to say at this moment, but we will grow the number of ID and also work on ARPU. We will work on increasing ARPU so that ARPU will increase, ARPU revenue will trend upwards again. So we will focus on that. And one more point as Mr. Masuno said, the AU support discount is also very popular. Yes, so AU support discount. So 60% to 70% will continue and the au Support Discount will be gone in six months.
Daisaku Masuno
[Interpreted] So ARPU will, at one point will stop declining? What do you think?
Takashi Shoji
[Interpreted] Yes. au Support Discount, so if customers try the unlimited max and see how easy to use it is, and that is why we are lowering, as a discount. So I want the users to first experience. And looking at our experience and our data, quite a few users stay, once they experience. That is our experience. So I think this will show a certain level of impact.
Daisaku Masuno
[Interpreted] Thank you very much. My next question is about return, shareholder return. This time ¥50 billion of buyback is resolved. What was the background? And what was your line of thinking to decide this amount? And what is the continuity, the sustainability of this policy? Thank you.
Ikuko Hongou
[Interpreted] Thank you. Let me answer that question. So this time, the message and our thinking behind this is two-fold. First, as you know, the first point is before we start the new medium-term management plan, EPS growth was announced. So in six years’ time, we want to increase by 50% by year ending March 2025. But the environment changed more than we anticipated. And we received questions on what we will do with this target. But we will still aim to achieve this target. We have the determination to achieve this target. And with that in mind, we announced this buyback plan and the shareholder return plan. Now, EPS growth, compared to the initial plan is slower. So towards the next medium-term management plan, we will make a recovery. So that is our strong commitment and determination.
Second point, as management, we are not content with the current share price. So that is the message. I hope you could take it as our message. Thank you very much. I hope this answer your question.
Daisaku Masuno
[Interpreted] Thank you.
Operator
We would like to entertain the next question. Next Daiwa Securities. Mr. Ando, unmute yourself. Please ask your question.
Yoshio Ando
[Interpreted] Can you hear me?
Operator
Yes, we can hear you, sir.
Yoshio Ando
[Interpreted] I have two questions. First, mobile. KDDI's more detailed information. Regarding the churn rate, it's a little higher -- high. Also, we look at the movement in the past, more sales and UQ has been very, very good. That's how I see those figures. But regarding UQ, what kind of things are selling? You already introduced to us cheaper plans. Those are the main stream; am I correct in assuming that? As for the AU, in terms of revenues, are they increasing? Is that the direction the detailed information? And also how is your churn rate outlook? Would you like to elaborate on this, please?
Shinichi Muramoto
[Interpreted] Thank you. Shoji will answer your question.
Takashi Shoji
[Interpreted] First of all, as you pointed out, regarding the churn rate on year-on-year or on a quarterly basis, yes, it was high. Having said that, on the other hand, if you look at the market, it's becoming rather mobile. I mean, it's invigorated the new sales, and we both have -- had strong momentum. I hope you will understand it in that way, the momentum was strong. The fourth quarter, it's a sale, active sales, periods. Churn rates tend to be high. Is it going to be the current level or it might actually turn out to be higher but by moment, maintaining this momentum, we would like to just keep making efforts regarding UQ. Probably, regarding [Indiscernible] question, I think you are referring to plan or plans. I mean, it varies. Price sensitive people, they go-forward the planners. The least expensive one, but plan M, plan L. Our price offering is pretty strategic. There are more customers who choose M and L and also on UQ under 18 that support discount. With strategic pricing offered to customers, now UQ support discount. They are actually growing. Most of them go for the high end plans. And one thing about AU, you raise question. I'm sorry, I couldn't hear you. What was your question again about au?
Yoshio Ando
[Interpreted] Again, on au increased revenues, do you see that direction that this contributing to the increase to revenues?
Takashi Shoji
[Interpreted] As we already explained to you, compared with our internal estimates, more customers remained with au. Having said that, if you look at au, U2 approval, there's still many people who move to those brands from au. On the other hand, with the iPhone sales launch, the 5G handsets, the sales were pretty brisk. And most of them actually chose the 5G plan. And more than 60% of those people who had chosen 5G, they use unlimited max. And OTT services bundled plan, as we offering, they are on the significant increase. So I think it's going to turn out to be better in the future. Thank you.
Yoshio Ando
[Interpreted] My second question, Page 3. If I look this is step by step chart, would you like to actually elaborate on this? Depreciation was actually mentioned. The Group MVNO plus roaming revenues, that part, perhaps in the third quarter, it's on the increase, am I correct? And about others? I think that are major changes there. So those two-parts Group MVNO plus roaming revenues. Probably you Broxton roaming is included here. So this roaming, the [Indiscernible] you to do over the service, but I think this is the situation is changing. What's the direction and also the revenue trends in the third quarter. There is kind of a deviation or this is [Indiscernible] [Indiscernible], and also the outlook. And also the others. Some more. Detailed information about others spot please.
Takashi Shoji
[Interpreted] First about the doctor to and roaming revenues from Rakuten. Second quarter and the third quarter. Competitive with the second quarter, there's a significant increase, I think. But the -- it's not that the substance has changed significantly. Did I answer your question?
Yoshio Ando
[Interpreted] So [Indiscernible], regarding the scope of the roaming it's being reduced too? Is that -- I think, that's what you're driving at.
Takashi Shoji
[Interpreted] But on KDDI in this quarter, at least there was not much impact. That's right. Not the significant change. Slight change, I would say.
Yoshio Ando
[Interpreted] So going forward, anything you'd like to share with us at this juncture about this roaming?
Takashi Shoji
[Interpreted] Regarding this term, at least, as I have been saying, with the -- our expectation, I think it have move within the expected range. As for the others --
Yoshio Ando
[Interpreted] Yes, please give us more information. But others, I'd like to ask Saishoji.
Takashi Shoji
[Interpreted] Saishoji speaking. About others, many things -- there are some ups and downs. But regarding the significant one, handset purchase support program, loss reserve, distributor has decreased, that's the major factor. Regarding the support program handset purchase support program, including the past ones. There are various ones before each program. The loss reserve, on every quarter is market-to-market and that's listed. Regarding this term, together with the expiry programs, the number of expected to -- the people who might exercise the right, that decreased also, with the receivables decreased. And also they want 3D handsets for the resale that -- the unit price increase. So that is why that reserve was declined. The third quarter in the previous term, the reserve actually peaked as a difference. There was a huge negative figure for the reserve.
Yoshio Ando
[Interpreted] So this is a transient currency and exchange or is it going to continue?
Takashi Shoji
[Interpreted] As I said before, regarding those parameters, there are some increases and decreases. It's difficult for me to say at this moment. But at the moment, the program for the one that has expired, the trend is decreasing. On the other hand, we have a [Indiscernible] or a trading program. For this program, is slightly to increase. For this program, versus previous year, previous year How are these going to move on the P and the O, there might be some effect. Thank you.
Operator
Next question, please. Mitsubishi UFJ Morgan Stanley Securities. Mr. Tanaka, please tap the unmute button and ask your question.
HideakiTanaka
[Interpreted] Mitsubishi UFJ Morgan Stanley, Tanaka is my name. Can you hear me?
Operator
Yes.
Hideaki Tanaka
[Interpreted] So I have two questions. First, Life Design Domain. So in the detailed material Page 5, this is the page I'm looking at. Life Design, three months operating income is same as last year, so the profit is not growing. But the multi-brand, the added value ARPU, is growing steadily. So in that sense, maybe the factor is the cost side, but the reason profit is growing. So the subsidiaries -- some subsidiaries for financial results is not good. So could you explain that? And the future forecasts, please. Thank you.
Shinichi Muramoto
[Interpreted] So this question will be answered by Mr. Shoji.
Takashi Shoji
[Interpreted] Yes, let me explain. First, as you rightly mentioned, the compensation service and the financial service credit card and Denki electricity, they are all trending strongly. And therefore, top-line is moving steadily. So you may think the factor is on the cost side and you are right. So cost side, the biggest sector, as Mr. Muramoto mentioned in his presentation it is energy. So this is page nine of the presentation. If you see in this graph, this light blue is last year J-TES price -- [Indiscernible] price. It surged in fourth quarter last year. Our profit and loss in the fourth quarter was very difficult last year. So in order to avoid the volatility, we increased the private power source -- power purchase this year to control our costs. Until third quarter, JPX price was a low, and therefore, we were able to procure at a low price. The cost was low. But this time, it is private power source procurement. And to avoid the volatility. So the costs relatively increased. And so up to the third quarter, energy costs showed -- is shown like this. But in the fourth quarter, on a year-on-year basis, this fourth quarter profit will increase significantly year-on-year. So we will see recovery in profit. And one more point, in terms of the yen value, it is less than 1 billion, so it's not large, but one-off factor pushed up the profit. So on a year-on-year basis that also led to this difference. Thank you.
HideakiTanaka
[Interpreted] Thank you very much. So looking into the future, energy, profit, and loss, excluding energy, profit, and loss, what will be the increase in profit?
Takashi Shoji
[Interpreted] We do not disclose the details. But energy -- I'm sorry, I do not want to be misleading. But energy is also generating profit. It is. But that's the degree of profit, the amount of profit. Energy as you see, ¥3.24 million and we are trending towards our goal of ¥3.4 million. And with that, our revenue will go up and other mobile -- this will reduce the churn of the mobile and other businesses. So it's very effective. So the key is cost control. The absolute amount is one factor we have to keep in mind. But if we can avoid volatility effectively and reduce costs and generate profit, increase our profit. It will -- that's our goal. That's what we're trying to do.
Hideaki Tanaka
[Interpreted] Thank you. So you are generating profit, but the profit is lower than last year?
Takashi Shoji
[Interpreted] Yes. At least until third quarter.
Hideaki Tanaka
[Interpreted] Understood.
Takashi Shoji
[Interpreted] Thank you.
Hideaki Tanaka
[Interpreted] Second question. So in the presentation material, we'll page 16 Please. So this is connected services. IAC line connected cars are expanding, I think. Based on my estimate, revenue -- given your big [Indiscernible], this revenue coming from this may be small, relatively speaking. So what do you think of the profit, revenue contribution from this area? Could you elaborate?
Shinichi Muramoto
[Interpreted] Thank you very much. So Mr. Mori, in-charge will explain.
Keiichi Mori
[Interpreted] Thank you. So from this -- we started this from fiscal year 2019. So this was an upfront investment, but now we are starting to generate profit. And this profit is not just the Japan of the headquarters side, but also in our overseas subsidiaries. We're seeing a contribution in the overseas' entity side, too. And the number is growing. And now we are in a good position to start generating profit. Yes. Thank you.
Hideaki Tanaka
[Interpreted] But would GCP, global communication platform, you have industry opportunities, you have much potential to expand is, but in this area conducted car area and other area connected car area, we will be sizable in terms of revenue.
Keiichi Mori
[Interpreted] Number of lines for connected CAGR is large number of communications for connected CAGR is large. So this is a big contribution for industry. Comparatively speaking, is fewer. But that said, gas meters are growing significantly, rapidly. So we think eventually it will grow but now, the connected car is coming first. Thank you. That's all.
Operator
[Operator Instructions] Unmute yourself.
Shinji Moriyuki
[Interpreted] Thank you. I plan to check on numbers. Migration. This year, operating expense of ¥30 billion is prepared, I think you said that. To the third quarter, how much has been used already? Just rough numbers will be appreciated. And about the facilities-related expenses, the plant manner, that's being available third quarter and the fourth quarter. Concerning 3G determination, there is no increase? Am I correct in assuming that? That's my first question. Well, regarding those numbers, I don't have those numbers with me at the moment. So I probably have to repeat what I said before. Operating expense ¥30 billion. Relatively speaking, it's on the second half, and particularly more on the fourth quarter. I hope for you will understand. And 3G-related expenses, in principle, it's actually flat. I couldn't really understand your intent. thing. Knowing the fourth quarter. Finally, it's going to be terminated. So compared with the third quarter, the facilities related, any retirement expense in your top up, any factor for increase? I don't really think so. It will be about the same amount, more or less, right? Also the second question, I understand it would be difficult for it to [Indiscernible] is onto last year, about this power electricity you shared with a system fluxes. In the fourth quarter disaffected forward or decrease of 30 billion years. So I understand that. But third quarter onto the third quarter this was a factor for the decrease but in the next is first quarter onto because of the new Construct you're going to keep enjoying an increase to income on my corrective.
Takashi Shoji
[Interpreted] So diesel. To give you a total fixture? Yes. Total picture [Indiscernible]. Avoiding volatility is so important. To that end, various things -- we have been exploring many things this year. And towards next year, we are exploring. We will be exploring even better ways, if there are any. Regarding the next year. Let me see, at least as good as this year, but revenues would increase. Total income should increase; such is the operation that we would like to explore with full commitment because electricity procurement is so difficult. We would like to explore many things. And we were just -- we would like to really try to bend backwards doing this.
Shinji Moriyuki
[Interpreted] Until the third quarter, what was the actual level of its contribution to the negative Profit?
Takashi Shoji
[Interpreted] It's difficult for you to disclose that. I hope we will forgive me. I can't so several billions of YENS.
Shinji Moriyuki
[Interpreted] cumulatively billions of YEN that's great so thank you.
Operator
We will take one more question. So if you have any questions Instructions] Yes. Thank you. Citigroup Securities, Mr. Hongou, please press the unmute button and ask your question.
Hongou
[Interpreted] Thank you for this opportunity. So the way of thinking of ARPU, so ¥4,200 this year. So the fourth quarter, we anticipate a significant drop. So is that the correct line of thinking? And based on that next year's ARPU, your estimate. So when do you think this ARPU decline will bottom out? I asked this question last year but same question again. Thank you very much.
Shinichi Muramoto
[Interpreted] Thank you for the question. Shoji - san.
Takashi Shoji
[Interpreted] First question, fourth quarter. This year, we will end at ¥4,200.
Hongou
[Interpreted] Which means that we will see a further drop in the fourth quarter.
Takashi Shoji
[Interpreted] Yes. The answer is yes. [Interpreted] Some market ID is trending strongly. But the market trend is still the mid volume service. of course AU Unlimited use max is strong and we will grow these areas. But in total, we will anticipate a slight decline. And in the end, we want to 4200 yen at the end of the year. And second question, it's difficult to say at this point because we are trying to plan to see what it will look like along with IP -- ID momentum, as I mentioned a few times today, au, UQ, povo, with the three brand mix. We think the usage will increase and so with this, we hope we can make a rebound, a turnaround as soon as possible. But we're still in the midst of the planning. Thank you very much.
Hongou
[Interpreted] Thank you. If possible, I have one more question. Very short question. So the net addition. December addition was strong. And so with that trend, I think you're planning for January to March. So it's January, what is the situation in January? Is the momentum for strong December continuing in January?
Shinichi Muramoto
[Interpreted] May I? So December or third quarter, the entire third quarter was strong. Second quarter in the second quarter, financial results briefing, I said we will see a slight improvement and in August, September we saw improvement and a full scale improvement from October. In January, this trend has not changed much and as I said earlier, it is the new sales season -- launch season. So we will step up the effort to achieve the target by all means.
Hongou
[Interpreted] Thank you very much.
Takashi Shoji
Thank you.
Operator
Okay. We still have some time. Those of you who would like to raise questions, please click the raise hand button icon of Zoom application. There seems to be no one who would like to raise questions. So at this juncture, so with this, we plan to conclude the meeting on the KDDI's business results for the third quarter ending in March 2022. Thank you so much for your participation.
