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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you for waiting. KDDI will now begin the financial results briefing for the third quarter of the fiscal year ending March 2020. Thank you so much for taking the time to come today. My name is Horii from the Investor Relations department, and I will serve as your facilitator today.
This briefing will be interpreted simultaneously into English, and it will be streamed on-demand on our Investor Relations website. Thank you for your understanding.
Let me introduce the members. To your right, from the center, Senior Managing Executive Officer, Director, Executive Director, Corporate Sector, Muramoto; Senior Managing Executive Officer, Director, Executive Director, Personal Business Sector, Shoji; Managing Executive Officer, Director, Deputy General Manager, Personal Business Sector, Morita; Managing Executive Officer, Director, Deputy General Manager, Personal Business Sector, Amamiya.
To your left, from the center, Executive Vice President, Representative Director, Executive Director, Technology Sector, Uchida; Senior Managing Executive Officer, Director, Executive Director, Solutions Business Sector, Mori; Administrative Officer, General Manager, Corporate Management Director, Saishoji.
We posted 3 materials related to earnings and 1 TSE disclosure document on our IR website. Please refer to the disclaimer for the contents of the distributed materials as well as the business results and subscriber targets mentioned in the Q&A session.
Senior Managing Executive Officer, Muramoto, will first explain the financial results followed by Q&A. Mr. Muramoto, please.
Once again, thank you so much for joining us. Thank you very much for coming to the meeting on KDDI financial results out of your very busy schedules. Let me share with you the results of the third quarter of the fiscal year ending March 2020.
First, highlights of the financial results for first to the third quarter. The left shows the third quarter where the cumulative operating revenue was JPY 3,902.6 billion. The progress ratio versus full year forecast was 75.0%. To the right, the operating income was JPY 843.9 billion. Progress ratio was 82.7%. We had a leap-ahead performance, better positioning us to secure sustainable growth going forward.
Next, operating income factors for change. From the left, the life design domain, a growth field, and the business segment continued to drive the performance. Cumulatively, from the first to the third quarter, the handset sales cost increased year-on-year. But since October, it tended to come down significantly due to the business law revision. The first half, as a result, ended with a decreased profit. But higher profit of the third quarter alone, however, turned to -- turned the cumulative results to the upswing in the profit.
Next, the operating income of the growth fields. Both the life design domain and the Business Services segment maintained double-digit income growth. The progress ratio versus full year forecast was 81% in life design domain, 90% in Business Services segment. By spending cost on measures to boost engagement in the fourth quarter, we tried to build the base and the foundation for sustainable growth.
Next, on au churn rate and mobile IDs. The left shows au churn rate since October. The market fluidity decreased significantly, and au churn rate improved to 0.11 point year-on-year at 0.61%. The right shows mobile IDs, which was up 290,000 year-on-year at 27.09 million IDs.
On January 26, this week, UQ Mobile subscription exceeded 2 million. Group, as a whole, will continue to focus on increasing the number of IDs.
Next total ARPA and total ARPA revenues. The left, total ARPA was up 4.2% year-on-year at 707 -- JPY 7,770. The right, total ARPA revenue was up 3.3% at JPY 567.1 billion. Life design domain, such as value-added ARPA and au Denki ARPA, were driving the total ARPA growth. Now let me touch upon our endeavor to step up engagement. First, about our affiliation with Lawson and Loyalty Marketing for developed Ponta, which was announced last December. Through this collaboration, we will make most of 4.1 billion annual visitors, about 14,600 brick-and-mortar stores nationwide, over 1.7 million points and payment affiliated stores, expanding the points membership base and boosting our service base. We aim at creating new consumer experiences by expanding the connections so that more customers will become our fans.
Next, let me explain about the purpose of this affiliation. From May this year, our au WALLET points and Ponta points will be unified, making the membership over 100 million, amongst the largest in Japan. Also, utilizing more than 200 billion points awarded annually, we are making the points easy to use and save in order to expand the au PAY membership.
Next, let me touch on the relation between au PAY and engagement. Those customers who will use au PAY extensively are loyal users of our services and tend to have higher NPS and value-added ARPA. Through the collaboration with Ponta, we aim to enhance engagement and ARPA, with more customers using au PAY.
Next is next-generation convenience service with regards to augmented convenience stores. At Lawson's 14,600 brick-and-mortar points of contact, we'll leverage our state-of-the-art technology like 5G and AI and big data in order to offer new customer-tailored consumer experience and solve social issues through the convenience stores.
Next is enhanced entertainment with an eye towards the 5G era. In the 5G era, watching videos is stress-free, thus, KDDI has been working on enhancing attractive contents in advance. To the left is au Smart Pass Premium. Since last November, we have expanded our digital contents of movies, music and books. This is an unlimited use of entertainment.
On the right is Video Pass, which we are collaborating with Television Asahi. In addition to the existing contents, we have enhanced these contents with Television Asahi's unique contents. This service is slated to start this spring as new Video Pass. We will continue to expand both quality and quantity of the contents so as to offer services that are satisfactory to both au and non-au customers. Next is KDDI Group's IoT connections. The IoT connections, which we began offering from 2001 for the enterprises, exceeded 10 million connections in November 2019. KDDI has been accumulating know-hows in various fields, such as devices, network, cloud, data analytics, which are essential in implementing IoT. Going forward, through the services combining 5G and AI, we will promote the use in existing fields but also in expanding the IoT services brought through the global IoT platform.
Let me now give you concrete examples of providing new value through IoT. To the left is SORACOM, our subsidiary. SORACOM line that they use implements initiatives to continuously improve the quality of communication. This is the POCKETALK, which is offered by SOURCENEXT. This has contributed to the improvement in responses to the translation results.
To the left is our initiative with the Hitachi Transport System. We are planning to carry out a PoC for the sophistication of logistics using 5G. In this way, we will work with partners to further provide value and enable digital transformation.
Next is our initiatives towards the 5G era. Using 5G, KDDI started Shibuya 5G Entertainment Project in January with the purpose of contributing to the creative culture city project Shibuya Board is promoting. This project will experimentally use xR technology and AI to promote 5G-augmented experiences. In this way, while offering new experience value to the customers, we are steadily upgrading the infrastructure to begin the 5G commercial service in March.
Let me continue with other initiatives for the 5G era. In order to realize 5G, we have been working with various partners. We have been conducting PoCs, assuming use cases. As you can see, amongst them are monitoring mountain climbers or dairy farming. We are proactively participating in comprehensive 5G PoC for regional revitalization as well. KDDI will create a new experience value in the 5G era as we, along with the society, envision a future of sustainable growth and development.
Next is our initiative for network resilience. Assuming a large-scale earthquake like Nankai Trough earthquake, KDDI has been building 3 core transmission lines nationwide. Most recently, Okinawa Cellular Telephone Company has been working towards completing the construction of 760 kilometers undersea cable between Okinawa and Kyushu by March 2020. With the completion, we will have 3 lines to cover all regions in Japan. As a telecom operator responsible for critical infrastructure, we have -- we need to offer 24/7, 365-day stable telecommunication service. We will continue to drive efforts to build disaster-resilient network.
Next is on DPS. In accordance with the midterm plan to further strengthen our shareholder returns, the dividend for March 2020 has been revised upward by JPY 5 to JPY 115 from our initial forecast. We will continue to aim towards sustainable growth and stronger shareholder returns.
In summary, with regards to our financial results, we turned profitable in cumulative 3Q, performed leap ahead -- performance leaped ahead, better positioning us to secure sustainable growth going forward. Life design domain and Business Services segment sustained double-digit income growth.
With regards to growth fields, we aim to expand the number of au PAY membership by leveraging our member base of over 100 million and aim to create new consumer experiences in the life design domain.
In Business Services segment, IoT connections exceeded 10 million and working with partners to further provide value and enable digital transformation, steadily upgrading infrastructure for 5G commercialization in March. And we have revised our dividend up by JPY 5 based on the policy of sustainable growth and strengthening shareholder returns.
Thank you very much for your kind attention.
Now we would like to entertain your questions. [Operator Instructions]
The first question, Daiwa Securities, Mr. Ando.
Can you hear me?
Yes.
First question, since October, there is now an unbundling regulation. In your business, is this positive or negative? At this juncture, what is your judgment? And also, if you have reasons, please share those with us.
Thank you. Since October, in the mobile market, about the competitive landscape, Shoji will answer the question.
Allow me, Shoji, to address your question. In the handout, perhaps, as you can see, October, the business law was revised, and also the ordinance was revised. Mostly, we expected under -- as was also mentioned in the previous presentation, among the MNO -- amongst the MNOs, the fluidity contracted significantly. As a result, the new mobile ID numbers have been dropping.
On the other hand, especially about the month of October, until September, before the revision of the ordinance and before the increase of the consumption tax, there was a last minute demand. And in the month of October, new -- in the new business, it was weak. And also for the upgraded, it was sort of weak. But as a result, regarding a number of upgrade in the third quarter, actually, it's better than the plan.
Concerning these issues, it's to the extent that we expected, and I think this situation is likely to stay for a little longer.
An additional question on that, please. Amongst the 3 carriers, if you look at the relative relations, who's strong? Who's weak? As a result of this October, what was the net addition situation?
Regarding our internal project, it's almost as we planned. The upgrades, yes, it was higher. And amongst the MNOs, the fluidity contracted. It decreased. But MVNO, especially the one with lower prices, the carriers, they tend to attract the users, and that situation hasn't really changed. If you just look at the 3 carriers, the fluidity decreased so much so it's difficult for me to say anything about this.
Looking -- we should look at MVNOs as well. With MVNO included group as a whole, we want to ensure the number of IDs. As we've been saying for a while, this is one of the most important things. So in that sense, it's almost as we planned. Thank you.
My second question, life design domain, you've enjoyed very good performance on a continued basis. So that good performance is continuing. I would like to once again ask you to give me the reasons.
Shoji and Morita.
To give you a conclusion first, again, Smart Pass Premium is a financial settlement or payment, those are the ones that are important. So Morita will address your question.
This is Morita speaking. The reasons of good performance in the content, au Smart Pass Premium is contributing significantly to the profits. Concerning the subscribers, 9.03 million, so again, contributing to the profit. There's another thing we -- I talked -- we talked about in the second quarter. In energy, in electricity, the number of users has been on the increase steadily. While the profitability is low, the volume has increased, and the growth rate has been very high.
With the financial commerce, the sales have been increasing steadily. And JPY 4.57 trillion, that's the amount of financial transaction that have been dealt with. So in the life design, good performance has been contributed by these factors.
That's all, Mr. Ando?
Yes.
Next question, Mr. Kinoshita from Merrill Lynch Japan Securities.
Kinoshita from Merrill Lynch. Can you hear me?
Yes, I'm able to hear you.
I have 2 questions. First question, with regards to the trend in total ARPA. If you look at it on a 3-month basis, in Q2, it was JPY 770 (sic) [ JPY 7,770 ] and in third quarter was JPY 7,770 as well. I believe that the contribution of au Denki is changing. For example, in the summer, you're using more AC. I think the energy consumption is different. So can you tell us the breakdown? So what is the telecom, for example? And for electricity ARPA, I think from Q2, you're able to comment on it. So can I confirm that? So that's my first question.
So Shoji will answer that question.
So it is as you say in Q2 and Q3. So -- well, first of all, with regards to total ARPA, each item is overall steady. In particular, value-added ARPA is good. With regards to Denki, this is a seasonal factor. In Q2 and Q3, it fell because of the seasonal factor. But other than that, value-added ARPA is steady. And we do not have anything at the level which you should be concerned about, so please understand that everything is going well in progress. Does that answer it?
So Denki, you don't have any disclosure on the number?
In Q3 was JPY 350 -- JPY 650. Q2 was JPY 690. So on a quarter-over-quarter basis, it's down by JPY 40.
So telecom ARPA is flat?
Yes. Yes, it's a little better than flat, so slightly better than flat.
I see. I got a good picture of it. So second question. So you're saying it's steady. Even in your explanation, you talked about -- in Q4, you will be implementing different measures for sustainable growth. Specifically, where do you plan to spend more proactively? DOCOMO is 95% in terms of progress as well, so they are also aggressive in sales promotion.
Now with regards to the revision of the Telecom Business Act and the handset discount, I guess, you can't really do that on a full-scale basis anymore. So how are you going to compete in that domain? What is your feel for it? What is your approach? Can you be a little more specific about it?
Yes. So it's the personal business segment which we will be spending for sustainable growth. Amamiya-san, can you explain?
So let me answer that. In Q4, the impact of the revision of the Telecom Business Act, which took place in 3Q, we believe that this will be prolonged in Q4 as well. But if you look at it on a monthly basis, you can see recovery in the numbers. So the way we compete today, we will continue. So that by the -- and that's how we will do until the end of the year.
And we announced this recently. We are doing an au PAY campaign. This will contribute to the engagement in telecommunication business. We have found that out through the research we have carried out. So this is what we will do. That is all. Thank you.
Kinosho-san, is that all for you?
Yes. I'm done.
Next question, Mitsubishi UFJ Morgan Stanley Securities, Mr. Tanaka, the floor is yours.
This is Tanaka speaking. I have 2 questions. First, about the business segment or Business Services segment. The progress ratio has been very good in terms of measures for growth, what we have listened to you so far about your personal segment. That's my interpretation. Am I correct in my interpretation?
In other parts of the Business Services segment, were there are any extraordinary factors in the previous year? Or if there are any risk factors going forward, please let me know.
About the Business Services segment, Mori will answer your questions.
First, about the progress ratio, as you can see, it's been very good, steadily increasing. With regard to the measures for growth, within the business segment, we did have some measures. And as you saw in the beginning of this term and towards the next term, we call this a launching pad. The number of customers and number of services that we offer to the customers, increasing both of them. And then we would like to deepen our engagement and for a longer period of time. And this is one of the things we have been doing so far.
As for the future risks, it's a service for corporate. For the corporation's economic activities, there might be international development that might have impact on the activities. Coronavirus is one factor. To what extent they have an impact? That's one of the things that we would like to keep monitoring. Thank you.
Excuse me. You mentioned majors in the first part of your answer, increasing the services to the customers. In terms of business segment, it's difficult for me to envision what they actually are. For new things, doing more and more PoCs, is that what you mean? Or if you could just give me some specific ideas.
Understood. Understood. Let me talk about this. First, the 10 million, more than JPY 10 million IoT -- a 10 million IoT lines. I talked about this before, but offer more network available to customers, and we have been increasing those lines. But at the same time, speaking of new services, customers' DX, digital transformation, to support their DX, digital transformation. So in addition to network-related services, cloud service is another or data analysis. In those new areas, regarding the number of the initiatives that we do, together with customers, we have been increasing those. Thank you.
About the cloud service and the data analysis, that's really for revenues. So I didn't really think that those are the factors to lower the profitability. Did I mishear you?
Well. For instance, the agile development personnel, increasing the number of people working in that area, that's one of the things we did to expand more on the global scale that we have been doing some preparation. So the expenses have increased in those areas. Thank you.
My second question, global communications platform or GCP. Some time has passed. So what the substance of the contracts in terms of the revenues, the -- perhaps it has become more clearer. When it's increasing steadily, is it something that you expect a good contribution to the profits? Or while the unit price is low, even the volume increases, you still don't think that they can contribute to the profit? So just some rough ideas, please.
Mori, please?
First of all, regarding GCP, the automobiles is the one area where this has been applied. But in the automobile, we can expect to see a significant number. And we did make investment in a front-loaded manner, but with the number increasing, the contribution to the profit can be expected. We started this year. But in the second year, third year, it's likely to increase. But together with that, it's not just true for the automobile, it's true for others as well. That's just a connection-related services. But in the periphery, collection of data by using those B2C customers -- services for B2C customers, they can use our services and then we would like to increase our profits. Thank you.
Mr. Tanaka, was that all right? Okay then.
Next question, Mr. Takahashi from UBS Securities.
I have 2 questions. First question, with regards to CapEx in 5G. So you mentioned that it's possible to implement 5G in the existing 5G infrastructure, excuse me, existing infrastructure. So what do you think about that in terms of approach? And there's also tax reductions for capital expenditures. So through tax cuts, do you think the 5G CapEx pace will accelerate? So please give us your views.
Thank you. So with regards to CapEx, Uchida, responsible for technology, will explain.
So I am Uchida. With regards to 5G implementation to the existing spectrum, so we will proactively utilize the new spectrum for 5G. That's our basic stance. Now with the existing spectrum, the bandwidth is narrow. So one of the characteristics of 5G is low latency. So if we wanted to realize that, then we will be using existing spectrum. So the new spectrum and existing spectrum will be combined in order to respond to the needs of the customers. So that's how we would like to deploy it.
The second point about investment tax credit. I think that talk -- I mean, we see quite a bit of visibility, but I don't think they have fixed the details. So based on the intent of that initiative, we will be more positive, proactive in considering accelerating investment. So that is all. Thank you.
The second question, so you are increasing the dividend by JPY 5. I want to confirm with you, so you're thinking on increasing dividend payout and buybacks? What is your thinking on it? Why is the reason why you decided to pay out JPY 5 increase in dividend? And now with the increase in the dividend, I think the payout ratio will be about 43%. And in your midterm plan, your target dividend ratio -- payout ratio is above 40%. So from year 1, you have already achieved 43%. So what is your target in payout ratio? What do you have in mind?
Thank you. So let me answer that question. So our full year dividend has been increased by JPY 5. The reason is because we're doing very well in terms of progress and our performance business results. And with our full year results, we are seeing greater probability of being able to achieve our target, our forecast. So Q4, we will continue to achieve sustainable growth, and at the same time, spend the necessary cost.
And even from before, as a company policy, we wanted to balance the sustainable growth and return to the shareholders. So that is why with regards to the return to the shareholders, we have been looking to what we can do to reinforce that. And as a result, the end result was that we have decided to increase our dividend. Our policy in shareholder return, we believe, is dividend. We've always thought that way. So based on that line of thinking, we have decided to increase the dividend.
As you point out, I believe the payout ratio will be about 43%. That will be the level. In midterm plan, we said 40% plus. So in principle, we will be exceeding 40% in the next 3 years. So it's not just 43% flat. Every year, we will achieve sustainable growth and return to the shareholders. We will do both and we will take that in consideration as we make decisions. Does that answer your question?
So payout ratio is, in principle, you want to increase. Do you have that in mind?
40% plus. Yes, in 3 years, we would like to achieve 40% plus, for sure. Mr. Takashi, do you have any more?
No.
Next question, Nomura Securities, Mr. Masuno.
I have several questions, so I will ask them one by one. First of all, expenses reduction in the third quarter. I think it has a positive effect. Looking at the midterm plan, in the previous meeting, I asked this question. The new [ deal ] increased plus and the cost reduction, so it was JPY 100 billion, cost reduction was about JPY 70 billion. But in the next fiscal year and the year after the next, regarding the JPY 70 billion, in the year after the next, do you like to realize that? I think that's what you explained, but the progress or what you actually do, I am talking about the structural reform. So about the structural reform, could you please elaborate on them once again?
Thank you. Allow me to answer your question. First of all, as you said, in midterm plan, JPY 100 billion profitability improvement is something that we said. As a premise, in the midterm plan, in 6 years, the EPS times 1.5, increase it by 1.5x. That's the target. And in this midterm, the linear manner, we would like to grow EPS.
In terms of CAGR, it's about a 7% growth, and we would like to do this in the next 6 years. And in this midterm, we responded to this [ deal ]. We would like to have this EPS growth. And based on that, we would like to have this JPY 100 billion.
With regard to the progress about this JPY 100 billion, 90% has been -- already been factored into the plan. In the last meeting, as I shared with you, about JPY 70 billion structural reform. Corporate-wide enhancement of efficiency is conducted for JPY 70 billion. The rest is nonorganic new businesses and generating profits. About 90% of them have already been factored into the plan. So the next fiscal year and onwards, it becomes clearer under the FY 2021 that we would like to realize them. That's the target.
In terms of the substance, for instance, including virtualization, they're enhancing the network efficiency in terms of the technical matters. Or in shops operation, again, using DX, we would like to see a significant improvement. It's corporate-wide. We have been working on those measures. Did I answer your question?
For clarification, the March 2020, you won't see the actual impact. But then, that March 2021, you will get to see some. And March 2022, in the first -- last year, you will see the results. Am I correct in understanding that?
Yes.
My second question about the prices, unlimited plan -- with the unlimited plan. In the past, because the prices were high and I was wondering about the number of subscribers, but you lowered the price. I mean, the 50 giga plus, the other companies still offer certain prices, and it's -- your program is comparable to that. But the impact of the up-selling, for instance, 20 -- some people switched from 20 gigas, and I think that you have some up-sell opportunities. So I would like you to touch upon that.
And there's another. Again, this is about up-sell. With au brand, at the outset, among the MNO, the fluidity has subsided. But MVNO, there's still the fluidity. There's outflow of users. But with the au brand, the -- do you have any measures to address this low brand? If you have any measures, please share those with us, with me.
Shoji will answer all your questions first.
You just pointed them out correctly. The unlimited service, we were the kind of a pioneer in providing that service, unlimited service. As you know, there are actually 2 kinds: the Netflix plan and Data MAX Pro, with -- that's without Netflix service. So what's the difference between the 2? Data MAX without Netflix, Data MAX Pro, tethering is pretty significant, so that's the difference. But the Data MAX Pro, the JPY [ 1,500 ] price reduction was conducted the other day. 20 giga -- up-selling from that service is part of our aims, as you rightly pointed out. And going forward, this is going to be the spring season and very important time for the student discount. So strategically, we lowered the price. And without a doubt, without a doubt, up-selling, especially for the high customers who prefer high capacity, the -- yes, up-selling has been progressing. As we envisioned, it has been working out pretty well.
About the au brand. For the customers who will pay relatively low prices, you asked this question. It starts with JPY 1,980. There's Pitatto plan available, and we have been continuing this service. And as for the Pitatto plan, if you exceed 1 giga up to 4 giga, JPY 2,980, that plan is available, already available. So for those people who prefer the low prices, we have something to offer to them as well.
But the BIGLOBE or UQ are the things that the customers can use if they prefer even lower prices. So the -- those are the choices that we have available for our customers.
My last question, au PAY. You already announced a new initiative. But in the fourth quarter, you talked about spending costs. About the scale, the -- what's the amount of the investment for au PAY? And I'm pretty sure you expect to see some impact, a good positive impact in the next, but what's the scale of the positive impact? That's going to be the -- my -- this is my last question.
Again, allow me to talk about this. The au PAY, yes, we made some announcement. The -- for 7 weeks, the JPY 1 billion, the point award, that's the JPY 7 billion. That's the simple calculation.
About this, why are we doing this campaign? As was mentioned in the presentation, if you look at those customers, our touch points, where are they most important? The au shops or our corner in GMS? So pooling -- it's a pool type of the sales activities. And for the next 3 -- 2 or 3 years, if it doesn't work out, we can't get to see the customers. The Smart Pass Premium or Wowma! are used by our customers. We do have those touch points with our customers. But still, our engagement with customers or satisfaction level of the customer, sometimes they go up, sometimes they go down. That's the fact.
Now financial settlement. Almost every day, customers use the service in terms of commercial material that they could use them. au PAY is a very sophisticated settlement. The convenience stores, supermarkets, the customers use their smartphones. This is a very important touch point for us. With our services, this NPS, we know that it's linked in terms of the hub better the NPS becomes. And that's one of the reasons why we have this big campaign.
And the affiliation or the collaboration with Ponta has been decided, so the -- we really would like to see -- get -- create a momentum so that customers can use them.
As for the recovery of the investment, as a financial settlement business, of course, we will address that. But in total, churn rates can be controlled low. And by enhancing engagement, customers can start to use other services. So in a holistic or in overall manner, we would like to look at the recovery. So I'm sorry, but I can't really get into the more concrete answers. Sorry about that. Thank you.
Next question, Mr. Tanabe from JPMorgan Securities.
My name is Tanabe from JPMorgan Securities. I have 2 questions. So first question, with regards to life design domain. Your plan for this year was JPY 167-point billion, and your progress is good until Q3. And so if you look at Q4, it will be about JPY 31 billion. And I think there was consolidation this year. But even then, compared to last year, this is down by maybe 20%. As you have been explained from before, if you include payment, like au PAY, this is your financial services business. But -- so aside from the JPY 7 billion, are there any additional cost that you will spend that will make it difficult for you to achieve JPY 167 billion on a full year basis? Or do you think JPY 7 billion is all, and that, in principle, you will exceed JPY 167 billion? So can I get a view on how I should be interpreting this?
Thank you. My name is Morita from life design. I may explain. So you are right, the progress until Q3 in terms of profit is 81%. Now after this, do we finish at 100%? With regards to that question, to be honest with you, we think that we could go -- there's a slight upside to this. In principle, we're aiming for increasing revenue and income. So does that answer your question?
Yes. In life design domain, the cost you're spending for sustainable growth basically is for financial services, is that right?
In principle, as Amamiya mentioned earlier, the campaign for au PAY, which will start from 10th of February, the cost of that will be -- has an effect of enhancing the engagement in the telecom business. So the cost will be absorbed by the personal segment as a whole. So the cost will not compress or pressure the profitability of the life design domain directly.
So second question, with regards to IoT, I think maybe there's a question -- an explanation. But if you look at the full year target for this year, so that was, I think, 10 million at the end of the year, but you achieved this in October. So how much growth do you expect by the end of the year? And also, the 10 million connections that you have been able to accumulate, can I get some views on the breakdown? So the end users, are they retail customers? Or are they B2B? Or even among the B2B, so maybe a bias towards a particular type of business sector, if there's a big chunk of it?
Then Mr. Mori from business side will explain.
So the level of connections by the year-end, at this point in time, net additions is very steady. So it could be 11 million or so, somewhere close to that. I think that this may be achievable by the end of the year. And I think that momentum will continue on in the next fiscal year as well.
With regards to the IoT connections and the use of it, I guess, the question is who the end customers are. In terms of numbers, B2B2C, so C, consumer customers, we're seeing increase of that.
In terms of active users, so for example, the smart meters for electricity that started in 2015 and we've been able to build up on that nationwide. This includes individuals' households as well, and that will be considered as B2B2C, a big portion of that in B2B2C. And also, we originally had home security customers. And also, we have been doing this from before, but we see increase recently is the connected car related. So we are making efforts to expand that to other areas as well. That is all.
Okay. Then our time is almost up, so maybe we can take one more question.
The last question. Goldman Sachs, Mr. Matsuhashi.
Matsuhashi from Goldman Sachs. So again, I have 2 questions. First, the number of mobile IDs, I would like a clarification. In the third quarter, perhaps for the first time, quarter-on-quarter, I think there was some reduction. In your previous explanation among MNO, the -- there is a less competition, but see, there's more competition among MVNOs. So in terms of numbers with the UQ, I don't really think that you did well enough in UQ, so that can be covered. So did it flow into SOFTBANK or other carrier? I don't know. But regarding this situation, why do you have this situation according to your analysis as KDDI? And what are the measures that you are taking to address this issue.
Thank you. Shoji, covering personal.
This is Shoji speaking. Regarding the numbers, as you rightly pointed out, especially Amamiya mentioned this already, after the revision of Business Act in the month of October, they're very difficult, especially in terms of the new contracts.
To give you a conclusion first, there was a slight decrease this time. But fully, if you look at the full year targets, and as you know, now after the revision of the Business Act, we did anticipate that. So compared with what we envisioned, actually, this one turned out to be better, to be honest with you.
And you mentioned UQ, group-wide, we believe that we were able to ensure a certain level of numbers. But unfortunately, yes, there was a slight decrease, including UQ. We don't really think that we did that badly. To the fourth quarter, there is going to be -- the important to do a spring -- their season, so we would like to see some recovery.
Understood. My second question about life design business, a question for clarification. In terms of revenues, compared with the beginning of the term plan, I think that it has been a very good progress. Beginning of the term, you had certain plan, but in terms of revenue, what are the factors for the better performance?
Also, you mentioned JPY 7 billion about payment-related cost for the fourth quarter, but the first quarter to the third quarter versus JPY 7 billion, what is the numbers? And what were the numbers in the previous year? To the extent possible, could you share those with me?
Excuse me. You mentioned -- about the JPY 7 billion, the first quarter to the third quarter, in comparison, I couldn't get your question.
So JPY 7 billion, that's a big number. The first quarter, second, third quarter, what are the actual numbers for each quarter, comparable to that JPY 7 billion? I'm talking about the campaign.
So Morita.
First, about the life design domain, better than the plan. So where was something that we didn't expect, I think that's what you asked us. Overall, the numbers were higher than expected. As I said, concerning the Smart Pass Premium, customers have been supporting this.
As for au Denki, again, we were able to get customers. So compared with what we thought, the result was more positive.
Regarding the second question, the comparable to JPY 7 billion campaign, so far from the first quarter to the third quarter, to what extent we did? In a way, speaking of small campaigns, I'm sorry to say -- call this a small campaign, but JPY 7 billion level of campaign is something that we do for the first time. Now at a certain store where the au PAY is possible, the -- doing that 20% refund campaign, yes, we did that. But the JPY 7 billion level of campaign, this is something that we do for the first time. In the first to the third quarter, we didn't do such the -- an extensive level of campaign. Right. I don't know the numbers, JPY 1 billion to JPY 2 billion and maybe less than JPY 1 billion. We didn't do that kind of a high -- we didn't do that kind of extensive level of campaign.
Thank you very much. Our time is up. So with this, we would like to close this financial results briefing for the third quarter of the fiscal year ending March 2020. Thank you very much for attending.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]