FAQ regarding Timely Disclosure announced on April 10, 2024

FAQ

• Q1

  Why did you revise the full year consolidated financial forecast?

  A1

  Full year forecast has been revised due to provision for KSGM's lease receivables from Myanma Posts and Telecommunications (MPT), as well as the impact of the provisions for impairment and removal of underutilized telecommunications equipment in Japan. We view these measures as necessary for ensuring sustainable growth, and the impact is transient. In our performance other than the Myanmar telecommunications business, progress is being made smoothly. In addition, we will strive for the full collection of the lease receivables even if it may take time.

• Q2

  What is the impact of the revision of the full year consolidated financial forecast?

  A2

  Consolidated operating income and profit attributable to owners of the parent will be impacted by the revision. Consolidated operating income will decline 130 billion yen (-12.0%) from the full year forecast of 1,080 billion yen at the beginning of term to 950 billion yen, and profit attributable to the owners of the parent will also decline 45 billion yen (-6.6%) from 680 billion yen at the beginning of term to 635 billion yen.

• Q3

  Will you revise the consolidated free cash flow (FCF) results?

  A3

  Since there is no impact on cash flow, the performance forecast is not revised.

• Q4

  Why did the company announce the earnings revision at this point in time?

  A4

  The provision for lease receivables was based on the fact that it has been two years since the dollar exchange regulations were initiated, and that the telecommunications business in Myanmar will post operating deficit for the three consecutive fiscal years.

• Q5

  What is the breakdown amount of the provision for lease receivables and the provisions for impairment and removal of the equipment?

  A5

  Breakdown is 105 billion yen for provisions for lease receivables and 25 billion yen for provisions for impairment and removal of underutilized telecommunications equipment.

• Q6

  Why is the rate of change in net income relative to operating income so low?

  A6

  The provision for lease receivables will have an impact of -105 billion yen on operating income, but an impact of -52.6 billion yen on profit attributable to the parent because of the non-controlling interest in Sumitomo Corporation's equity.
  The decrease in profit attributable to owners of the parent will be lower due to other positive non-operating income and loss as well.

• Q7

  Are there any changes to the shareholder returns policy?

  A7

  There is no change to the initial forecast for the dividend amount per share (interim 70 yen, end of the fiscal year 70 yen, annual 140 yen).
  We will give an overview of our cash allocation policy for the future at our earnings conference for the fiscal year ending March 2024, which will be held in May 2024.

• Q8

  What are your thoughts on the impact on earnings and profit levels for the 25.3 fiscal year and beyond?

  A8

  The financial forecast for FY25.3 will be explained at the financial results conference for the fiscal year ending March 31, 2024, to be held in May 2024. The provision for lease receivables in the telecommunications business in Myanmar and the provision for impairment and removal of underutilized telecommunications equipment implemented in this instance are necessary for continued sustainable growth and the impact will be temporary. As for our performance in areas other than the telecommunications business in Myanmar, progress is being made smoothly. Please recognize that the launch pad of operating income for the fiscal year ending March 2025 is 1,080 billion yen.

• Q9

  What are the details of provision for lease receivables?

  A9

  KSGM supports the telecommunications business operations of Myanma Posts and Telecommunications (MPT), in which it leases telecommunications and other equipment to MPT and holds lease receivables denominated in US dollars. In addition to the foreign exchange control regulations by the Myanmar government that started in April 2022, the Myanmar telecommunications business was expected to post an operating loss for three consecutive fiscal years as of March 2024, and as a result of a review of the collectability of receivables for the fiscal year ending March 2024, the company has decided to record a provision for the allowance.

• Q10

  What are the details of the provision for impairment and removal of underutilized telecommunications equipment?

  A10

  With the nationwide coverage of 5G almost completed, the decommissioning and removal of 4G frequency stations that are underutilized due to the migration of traffic from 4G systems to 5G systems etc., was promoted. In addition, the liquidation of warehouse inventories etc. that had become surplus in the process of transitioning to 5G led to the recording of the impairment and removal provisions.
  From the next fiscal year onward, the company expects it will be the same level as the average of previous fiscal years.