KDDI Corporation

Major negative: suspected improper “fictitious” transactions at BIGLOBE subsidiary (advertising agency business) - KDDI reported (Jan 14 discovery) that employees at BIGLOBE and its ad-agency subsidiary G-PLAN allegedly conducted fictitious transactions over multiple years in the advertising agency business (not communications services like BIGLOBE’s internet/telecom). - A Special Investigation Committee (external lawyers + CPAs) was formed Jan 14; audit/investigation is ongoing, so final amounts are not final yet.

Financial impact (reference figures, subject to change): revenue/profit reversal + provisioning - As of today, KDDI expects to cancel booked revenue due to fictitious sales: - FY ended Mar 2024: ~¥96bn - FY ended Mar 2025: ~¥82bn - FY ending Mar 2026 (impact so far): ~¥68bn - Total revenue cancellation: ~¥246bn - Profit impacts (reference): - Operating income reversal: ~¥8bn / ¥17bn / ¥25bn across periods (approx. total ~tens of billions) - Provision for commissions that flowed outside the company: ~¥5bn / ¥11bn / ¥17bn (approx. ¥33bn total external flow to other parties) - Impairment losses: possible (not yet quantified) - KDDI stated it will recover externally flowed amounts “to the extent possible,” but may need further actions once investigation concludes. - Important investor point: because investigation impact was not fully determined, KDDI chose to postpone the scheduled Q3 earnings release; instead they gave Q3 preliminary results now, and full figures are expected by end of March after the investigation report.

But the operating business is performing “well” (surprising resilience vs. the scandal) - After reflecting the transaction-related cancellations/provisions as reference values, the company reported solid cumulative performance for first 3 quarters (cumulative through Q3): - Operating revenue: +3.8% YoY - Operating income: +2.0% YoY - Profit attributable to owners / profit for the period: +5.3% YoY - Management highlighted positive drivers: - Mobile: structural transformation benefits - Finance/Energy/Lawson & related: improvement (incl. card growth) - DX/Tech & other services: positive - Headwind easing: prior-year promotional expenses negative impact has subsided