KDDI Earnings: In-Line Period With Little Impact From Rakuten’s Customer Boost

Narrow-moat KDDI’s third-quarter fiscal 2023 result (quarter-ending December 2023) was slightly below our expectations, but the company should still be on track to achieve its unchanged full-year guidance of operating revenue rising 2.3%, and both operating income and net profit rising 0.4%, in our opinion. Third-quarter operating revenue increased by 3.1%, with operating profit up 0.9%. The result was driven by a strong performance from the business services segment, which saw revenue grow 20.6% year on year and operating income grow 11.4%, offsetting the 2.3% year-on-year operating income decline from the larger personal services segment. Business services is being driven by data centers with the company opening new facilities in Frankfurt and Paris in 2023 and purchasing facilities in Canada. Mutibrand communications average revenue per user declined by JPY 0.8 billion year on year in the third quarter and was broadly flat over the first three quarters, with management forecasting a return to growth in the fourth quarter.