Main Businesses
Core Company
The Fixed-line Telecommunications segment was newly established in fiscal 2005 with the acquisition of JAPAN TELECOM CO., LTD. (company name at the time), which had entered the fixed-line telecommunications business following the deregulation of the sector in 1985. Management resources for fixed-line services are being shifted from relay services, the best known of which is MYLINE, to the OTOKU Line direct connection fixed-line voice service, which does not pass through the NTT Group's switchboards. In addition to being highly price competitive versus the NTT Group, OTOKU Line has established a superior position vis-á-vis other fixed-line operators with a variety of forwarding options and other high-value-added services, and its market share is growing as a result.
The customer base for data transmission services is also showing solid growth, with management resources being focused on direct connection services—mainly Ether Connect, a highly cost-effective fiber-optic broadband access line. The segment is not only involved in networks; it has successfully differentiated itself from its competitors in the area of conventional ICT*1platforms by providing integrated services that incorporate a variety of applications like security, e-commerce, and secure billing. The Fixed-line Telecommunications segment is in the process of shifting from relay services to direct connection services with high growth potential, and although segment sales have been basically flat, operating income and cash flow are increasing on this shift of management resources to more efficient businesses. This is evidenced by the fact that EBITDA*2 in fiscal 2009 has roughly tripled compared to fiscal 2006, and the EBITDA margin has risen 11.6 percentage points to 17.7%.
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SOFTBANK TELECOM is the SOFTBANK Group's contact point for corporate marketing, and together with SOFTBANK MOBILE is accelerating the pace of sales growth for SoftBank mobile phones. The sales force has grown 7-fold in fiscal 2008, and as a result SOFTBANK TELECOM sold more than 250,000 mobile phone lines during the year.
This strengthening of the mobile business is further solidifying SOFTBANK TELECOM's leading position in terms of its ability to provide solutions by being able to build a range of networks by combining its OTOKU Line service with mobile phones or Ether Connect. The business acquired a number of major corporate customers during fiscal 2009, including the leading pharmaceutical manufacturer Pfizer Japan Inc., which purchased roughly 3,000 SoftBank X05HT (manufactured by HTC) handsets for its medical representatives, and the major business consulting firm PriceWaterhouseCoopers Consultants Co., Ltd., which purchased approximately 1,000 iPhone 3G (manufactured by Apple Inc.) handsets for its consultants.
As noted in Key Segment Information, the segment's profitability and cash flow are showing marked increases. This reflects a lower depreciation burden from the end of major capital expenditures, combined with a structural transformation toward businesses with higher profitability. For example, the OTOKU Line business has not only worked to increase the number of lines in service, it has also focused on expansion of the corporate customer base, which generates a relatively higher ARPU. This has also reduced customer acquisition costs and operating expenses as a percentage of sales. To further accelerate the expansion of the corporate customer base, SOFTBANK TELECOM in April 2008 made JAPAN TELECOMINVOICE CO., LTD. (current SOFTBANK TELECOM PARTNERS Corp.), which handles OTOKU Line sales to small and medium-sized companies, as well as billing and collection, a 100% subsidiary.
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