Medium Term Business Strategy FY3/2012 - FY3/2015 Draft February 2012
Medium Term Business Target Growth Strategy 2015 Investment Summary 2
Medium Term Business Target 3
Previous 3-Year Financials Review Achievements Revenue increased by 65% to over 200 billion yen Transformation to positive recurring profit Reducing revenue and EBITDA dependence on fixed business Revenue Mobile (% share) Fixed (% share) FY3/2009 (pro-forma) 122.9 billion yen 61.4 billion yen (50%) 61.5 billion yen (50%) FY3/2012 (estimates) 203.0 billion yen 161.0 billion yen (79%) 42.0 billion yen(21%) EBITDA Mobile (% share) Fixed (% share) 2.2 billion yen - 18.5 billion yen 20.6 billion yen 63.0 billion yen 44.0 billion yen (70%) 19.0 billion yen (30%) Recurring profit - 31.4 billion yen 12.5 billion yen 4
Revenue Growth Comparison(3-Year) Highest 3-Year revenue growth of 65.2% during FY3/2009 to FY3/2012E Highest 3-Year revenue CAGR of 18.2% during FY3/2009 to FY3/2012E Absolute 3-Year Revenue Growth FY3/2009 - FY3/2012E 3-Year Revenue CAGR FY3/2009-FY3/2012E eaccess 65.2% eaccess 18.2% Company A 20.6% Company A 6.4% Average 4.4% Average 1.5% Company B 1.5% Company B 0.4% -4.7% Company C -1.6% Company C -10% 0% 10% 20% 30% 40% 50% 60% 70% Source: public information -5% 0% 5% 10% 15% 20% 25% 5
EBITDA Growth Comparison (3-Year) EBITDA 3-Year growth increased over 28X during FY3/2009 to FY3/2012E EBITDA 3-Year CAGR also increased over 200% during FY3/2009 to FY3/2012E Absolute 3-Year EBITDA Growth FY3/2009-FY3/2012E 3-Year EBITDA CAGR FY3/2009-FY3/2012E eaccess 28.6X 2763.6% eaccess 205.9% Company A 48.0% Company A 14.0% Average 9.4% Average 3.1% Company B 2.1% Company B 0.7% -5.8% Company C -2.0% Company C -500% 0% 500% 1000% 1500% 2000% 2500% 3000% -40% 10% 60% 110% 160% 210% Source: public information 6
Medium Term Business Target (3-Year) Growth Focus Increase revenue to 350.0 billion yen from 203.0 billion yen (up 72%) EBITDA growth to be driven by mobile business Recurring profit to 3x to 40.0 yen billion from 12.5 billion yen FY3/2012 (estimates) FY3/2015 (estimates) Revenue Mobile (% share) Fixed (% share) EBITDA Mobile (% share) Fixed (% share) Recurring profit 203.0 billion yen 161.0 billion yen (79%) 42.0 billion yen (21%) 63.0 billion yen 44.0 billion yen (70%) 19.0 billion yen (30%) 12.5 billion yen 350.0 billion yen 325.0 billion yen (93%) 25.0 billion yen (7%) 90.0 billion yen 80.0 billion yen (89%) 10.0 billion yen (11%) 40.0 billion yen 7
Subscriber Acquisition Target FY3/2009 FY3/2012E FY3/2015E Mobile 1.4 million 4.0 million 6.6 million Net Addition: +2.6 million Fixed 2.6 million 1.6 million 0.9 million Total 4.0 million 5.6 million 7.5 million 8
Capital Spending Plan FY3/2010 ~ FY3/2012E FY3/2013E ~ FY3/2015E Accumulated 3-Year capex plan 130.0 billion yen 100.0 billion yen * Capex focus Complete area expansion to 93% population coverage Complete underground & subway station coverage Network speed upgrade to 42Mbps (DC-HSPA) Network upgrade to LTE to 75Mbps & 112Mbps Backhaul upgrade to 100% all IP 100% underground subway tunnel investment Area coverage to expand to over 95% population coverage * Current capex figures do not include platinum band & migration capex * Capex figures to be revised after platinum band allocation 9
Pro-forma Summary Expect revenue to increase 72% to 350.0 billion yen from 203.0 billion yen Operating profit to increase 2x to 50.0 billion yen from 25.0 billion yen Recurring profit to increase 3x to 40.0 billion yen from 12.5 billion yen Unit: million users billion yen FY3/2009 (pro-forma) FY3/2010 (pro-forma) FY3/2011 (pro-forma) FY3/2012E FY3/2015E Subscribers 4.0 4.7 5.0 5.6 7.5 Mobile (% share) Fixed (% share) 1.4 (35%) 2.6 (65%) 2.4 (51%) 2.3 (49%) 3.1 (62%) 1.9 (38%) 4.0 (71%) 1.6 (29%) 6.6 (88%) 0.9 (12%) Revenue 122.9 176.5 195.6 203.0 350.0 Mobile (% share) Fixed (% share) 61.4 (50%) 61.5 (50%) 113.6 (64%) 62.9 (36%) 139.1 (71%) 56.5 (29%) 161.0 (79%) 42.0 (21%) 325.0 (93%) 25.0 (7%) EBITDA 2.2 44.5 64.5 63.0 90.0 Mobile (% share) Fixed (% share) -18.5 20.6 18.2 (41%) 26.3 (59%) 40.3 (62%) 24.2 (38%) 44.0 (70%) 19.0 (30%) 80.0 (89%) 10.0 (11%) Operating Profit - 22.4 11.8 19.2 25.0 50.0 Recurring profit - 31.4 0.6 8.9 12.5 40.0 10
Growth Strategy 2015 11
Growth Strategy Subscribers/Revenue Growth Strategy 2015 Step 3 Main Stream Carrier Step 2 Smart phone Strategy 2015~ Area coverage 99% Challenge mobile mainstream market Step 1 Strengthen Mobile Broadband Position 2012~2013 LTE Retention Branding 2013~2015 Shops Handset Marketing 2012~2013 2013~2015 2015~ 12
Addressing Existing Challenges Network Capacity issues due to increasing traffic. Speed competition ARPU dilution Price competition & increase in MVNO subscribers Churn Rising churn 13
Strengthen Mobile Broadband Position LTE Retention Marketing 14
LTE Strategy 1 st flat rate 3.6 Mbps 1 st HSUPA 7.2 Mbps 1 st HSPA+ 21 Mbps 1 st DC- HSPA 42 Mbps LTE 75 Mbps 112 Mbps Mobile broadband network leader HSPA HSUPA HSPA+ DC-HSPA 2009/11 2011/1 2011/3 2012/3 LTE 15
LTE Area Coverage Plan Speed Plan to launch LTE in March 2012 Expand area coverage to 70% by March 2013 75/112Mbps 42Mbps ~21Mbps LTE HSPA+/DC-HSDPA 70% 14Mbps HSPA 93% 100% IP Backbone EMOBILE G4 area is compliant area to downlink speed Max 42Mbps. (Some areas:max 21Mbps or Max 14.4Mbps) ** Nation-wide around 70%, Metropolis and government-decreed city: around 99%, Underground: 100% (end of 2012) 16
Mobile Broadband Market Growth Mobile Broadband Users 15.0 million 8.0 million 4.0 million 6.6 million Target Customers 1) Speed upgrade Migrate low/medium speed MBB users to high speed users (7.2/42Mbps 75Mbps) 2) New customers Attract new MBB customers from new entry users, fixed broadband & FMC FY3/2012 FY3/2015 17
ARPU and Churn Improvement Target to reduce monthly churn to below 1.5% level Target to recover ARPU back to around 3,000 yen level Churn improvement target ARPU recovery target (ARPU: yen) 4,000 1.37% 1.29% 1.40% 1.45% 1.50% 1.44% 1.54% below 1.5% 3,500 3,000 2,500 2,000 3,400 3,250 3,100 around 3,000 yen 2,950 2,860 2,730 2,730 1,500 1Q FY3/11 2Q FY3/11 3Q FY3/11 4Q FY3/11 1Q FY3/12 2Q FY3/12 3Q FY3/12 FY3/15 1,000 1Q FY3/11 2Q FY3/11 3Q FY3/11 4Q FY3/11 1Q FY3/12 2Q FY3/12 3Q FY3/12 FY3/15 18
Churn Analysis and Retention Plan Reduce churn (below 1.5%) with initiatives targeting three main causes (speed, coverage and price) (%) 100 80 60 1.5% Natural churn 1.0% Others Tariffs Retention Plan 4,980 yen (7.2Mbps) 3,880 yen (42Mbps) 40 20 0 Churn to other carriers EM churn Area Speed Churn reasons to other carriers 93% 7.2Mbps 95% improve indoor tunnel coverage 42Mbps/ LTE Source: EMOBILE former user survey (n = 400 people who churned in the last 18months) 19
Smart phone Re-entry Strategy 20
Smart phone Market Growth Expect smart phone market to reach over 50% penetration in Japan s mobile market (million) 120 60% 100 50% 80 40% 60 30% 40 20% 20 10% 0 FY3/2009 FY3/2010 FY3/2011 FY3/2012 FY3/2013 FY3/2014 FY3/2015 FY3/2016 Smartphone user Featurephone user Smartphone user ratio 0% Source: MM Souken 21
Smart phone Re-entry Strategy Shops Plan to expand EMOBILE shops Handset Preparation of LTE smartphone Marketing Strengthen branding and marketing Focus and target specific customer segments to expand smartphone subscriber base 22
Marketing and Sales Channels Strategy FY3/2009 ~ FY3/2012E FY3/2013E ~ FY3/2015E Marketing and channels investment focus Complete coverage of major electronics retailers nationwide Product awareness marketing of Pocket Wifi Investment in EMOBILE carrier shops & multicarrier shops Marketing investment in preparation for LTE Small investment in corporate brand Strengthen branding & product marketing 23
Shop Strategy Primarily multi-carrier shops Increase EMOBILE shops 800 stores Multi-carrier shops EMOBILE shops End of FY2011 End of FY2012 End of FY2013 End of FY2014 24
Franchise Shop and EMOBILE Shop Images Merits of franchise shops Leverage partner s knowhow of store operation Low initial cost for store development Low running cost 25
Investing in Marketing and Branding Marketing Strategy Increase company s brand recognition Strengthen product brand position as No. 1 Wi-Fi Marketing preparation for LTE & smart phone launch 26
Investment Summary 27
Investment Summary Strong commitment to Medium Term Business Target Target to achieve 6.6 million mobile subscribers in 2015 Aim to increase operating profit 2x and recurring profit 3x Strengthen mobile broadband position & marketing Enter smart phone market with target customer segments 28
This presentation has been prepared by eaccess Ltd. ( the Company ). This presentation contains forward-looking statements, which are subject to risks, uncertainties, and assumptions. This presentation is being presented solely for your information and is subject to change without notice. No representation or warranty, expressed or implied, is made and no reliance should be placed on the accuracy, actuality, fairness, or completeness of the information presented. The Company accept no liability whatsoever for any losses arising from any information contained in the presentation. This presentation does not constitute an offer or invitation to purchase or subscribe for any shares of the Company, and no part of this presentation shall form the basis of or be relied upon in connection with any contract or commitment. 29