February 21, 2014 2:00 am JST

KDDI sees 10%-plus profit gain ahead in fiscal 2014

TOKYO -- KDDI Corp. expects its operating profit to keep rising next fiscal year, thanks to continued growth in smartphone sales and a head start on promotional expenses.

     The telecoms group sees itself earning a consolidated operating profit of at least 730 billion yen ($7.06 billion) in the year ending March 2015, a gain of more than 10% over its forecast for the current fiscal year, Executive Vice President Hirofumi Morozumi told The Nikkei.

      KDDI expects revenue to continue climbing. When it comes to smartphones, "we aim to sell as many as our current-year forecast (8.6 million units) or more," Morozumi said.

      At the same time, the company will try to tamp down spending on customer incentives. It will rely less on monthly discounts for new contracts and more on other types of promotions, such as cash giveaways. It will front-load some spending on incentives this fiscal year, when it has some "leeway," Morozumi said. This means a lower burden next fiscal year and a higher average revenue per user.

     Last month, KDDI raised its operating profit forecast for the current fiscal year by 30 billion yen to 660 billion yen, which translates into 29% year-on-year growth.

      The January-March quarter is the most competitive season for mobile phone carriers, and for the first time, rival NTT Docomo Inc. is joining KDDI and SoftBank Corp. in offering Apple's popular iPhone. Carriers have all steeped up their promotional spending in a scramble for subscribers.

     But the industry is starting to see a slowdown in customers switching their old phone numbers to new carriers, Morozumi said. While it is hard to imagine KDDI's subscriber base growing as strongly as it has, the company will "definitely" reach its current-year earnings projections, he declared.

     KDDI is planning to pay 130 yen a share in dividends this fiscal year, which amounts to a 40 yen increase over fiscal 2012 when adjusted for a stock split. Given the company's payout ratio target of at least 30%, next fiscal year will likely mark a 13th straight year of dividend hikes. Higher dividends accord with KDDI's goal of attracting more individual investors, Morozumi said.