Japan-based mobile operator KDDI recorded solid profit growth in fiscal Q2, but a decline in mobile revenue due to falling tariffs offset stronger gains in its Life Design and Business units.

Net profit for the quarter ending 30 September rose 6.9 per cent year-on-year to JPY167 billion ($1.48 billion), with operating revenue increasing 1.9 per cent to JPY1.24 trillion.

The company said in a statement it needs to create sustainable growth in its domestic telecoms business and actively advance “new value proposals through integration of telecommunications and life design” services. It noted in H1 it achieved 55 per cent of its consolidated operating income target for the full fiscal year, “meaning that we are well on progress”.

Mobile turnover in fiscal Q2 fell 1.7 per cent to JPY444 billion. The decline would have been sharper, but MVNO revenue nearly doubled to JPY11 billion. Average revenue per account (ARPA) at its au mobile service also dipped 1.7 per cent year-on-year to JPY5,870.

No additional cuts
The weakness in mobile was caused by KDDI introducing new flat rate plans in July 2017, which it said separate the communications charges from handset fees. At end-September it had about 10 million au Pitatto and au flat plan customers. After the plans were launched, the average billing amount fell about 30 per cent, the operator said.

Jefferies equity analyst Atul Goyal said in a research note KDDI indicated it wouldn’t follow Docomo’s recent price cut announcement as it has already simplified price plans.

Handset sales were up 8.7 per cent year-on-year to JPY224 billion. Revenue at its Life Design business, covering its mobile wallet and value-added services, rose 5.7 per cent to JPY131 billion. Revenue in its Business segment hit JPY195 billion, up 5.8 per cent.

Total mobile subscribers increased 7.7 per cent from end-September 2017 to 53.5 million.

KDDI said it will start 5G service in certain areas in 2019, focusing on stadiums, with full-scale development coming in 2020. It aims to implement its 5G core in 2021, planning to launch various services using network slicing.