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Questions & Answers
Financial Results for the 2nd Quarter of the FY2011 ending December 31, 2011
2nd Quarter Results
- The monthly average revenue per unit (ARPU) for the second April to June 2011 quarter fell approximately 2% compared with the corresponding period of the previous fiscal year. Is this a more significant decline than anticipated, and if so, what was the major cause?
- In order to capture digitization demand in the lead-up to the complete changeover to terrestrial digital broadcasting on July 24, 2011, J:COM placed particular priority on expanding its customer base by applying a more price competitive structure to its services focusing mainly on J:COM TV My style. This was the major cause of the decline in ARPU, which is within the range initially anticipated.
Outlook for the 3rd Quarter and Beyond
- To what level do you anticipate subscribing household number will be affected as terrestrial digital broadcasting demand drops off from August, 2011?
- It is difficult to gauge the impact at this stage. Looking at the current status of installation orders, we do not expect any dramatic decline in the short term.
- Plans call for expenses carried over to be brought to account from the third quarter. What is the nature of these expenses?
- In addition to advertising, promotion and other expenses carried over into second half of fiscal 2011 as a result of the Great East Japan Earthquake, sales and marketing personnel costs, which had been contained during the first half are projected to rise slightly during the second half.
- Is there any change in capital expenditures for the full fiscal year from forecasts established at the beginning of the period?
- Certain initially planned capital expenditures were held back for the second half of the fiscal year due to the impact of the Great East Japan Earthquake. Capital expenditures for the first half of the fiscal year under review therefore fell below initial forecasts. Plans are in place for capital expenditures to increase from the third quarter to cover this unexpended portion. As a result, we do not anticipate any major change from initially established plans.
- It would appear that ARPU will decline slightly from the third quarter. What are your thoughts on ARPU trends in the future?
- Taking into consideration the increasingly intense competitive environment, it is vital that J:COM continues to release highly price competitive products. With this in mind, we believe that ARPU will be on a downward trend in overall terms. On a brighter note, we are confident that our ability to bring highly price competitive products to the market will not only help prevent cancellations by existing customers, but also help attract new customers. Accordingly, we expect the total number of subscribing households to increase. This multiplier effect between ARPU and the total number of subscribing households is projected to boost revenue.
- Looking ahead, J:COM will bolster its customer support operations. To what level do you anticipated selling, general and administrative expenses will increase?
- Expenses are projected to rise in the second half as we undertake the investments and expenditures necessary to promote medium- to long-term growth. These outlays are premised on the assumption that J:COM will achieve its business results forecasts for the full fiscal year.
