Rakuten Group has reported positive growth in its 2023 Full Year and Fourth Quarter Financial Results, with a 3.3% increase in sales and revenue for the final quarter. The company has seen growth across its various segments, including Internet services, FinTech, and Rakuten Mobile. Despite a non-GAAP operating loss in the fourth quarter, Rakuten has marked 27 consecutive months of positive growth, with consolidated revenue reaching JPY2.07 trillion. CEO Hiroshi Mikitani highlighted the company's focus on profitability, cash management, and leveraging AI technology, termed "AInization," to drive future growth.
Key Takeaways
- Rakuten's fourth-quarter sales and revenue increased by 3.3%, driven by growth across all business segments.
- The company reported a non-GAAP operating loss for the quarter but has maintained positive growth for 27 consecutive months.
- Rakuten Mobile aims to become the leading domestic mobile carrier, having achieved a 99.9% population coverage.
- Rakuten Bank and Rakuten Securities both reported increases in income and profits.
- The company is focused on integrating AI into its business model and has plans to improve the user experience on its app.
Company Outlook
- Rakuten aims to achieve full-year profitability and is concentrating on cash management and AI implementation.
- The domestic EC market, including Rakuten Ichiba and Rakuten Travel, continues to grow above industry averages.
- Rakuten Card has surpassed 30 million users, targeting a 30% market share and ¥30 trillion in GTV.
- Rakuten Bank and Rakuten Securities are contributing to the growth in the FinTech segment.
Bearish Highlights
- The non-GAAP operating profit for the fourth quarter was a loss of JPY3.6 billion.
- Growth rate of overall revenue has been slower due to the completion of certain B2B deals and a phase of the hometown tax program.
Bullish Highlights
- Rakuten Mobile reported increases in revenue, non-GAAP operating income, and EBITDA.
- The company's AI strategy, AInization, is advancing with deep learning technologies already in place.
- Rakuten's card and mobile tie-up promotion was successful, with 30,000 new sign-ups.
Misses
- There were discrepancies in the fourth-quarter results due to a significant deal with Rakuten Symphony.
Q&A Highlights
- The Saikyo Kazuoka family program and its impact on ARPU and subscriber growth were discussed.
- Rakuten Mobile's subscriber acquisition cost has decreased by about 50% from previous years.
- The company's strategy for ad revenue includes personalized ads through their communication service, Rakuten Link.
Rakuten Group is navigating its way through a competitive market landscape with a focus on innovation and customer acquisition. The company's emphasis on leveraging AI technology and enhancing its mobile services through synergies with its financial segment positions it for potential robust growth. With plans to optimize operations and reduce financial risk, Rakuten is committed to achieving its goals while maintaining its competitive edge in the market. The ticker symbol for Rakuten Group is not provided in the summary.
InvestingPro Insights
Rakuten Group's commitment to innovation and growth is evident in its recent financial performance. With a focus on AI integration and expanding its mobile and FinTech services, the company is poised for future advancements. Here are some critical insights based on real-time data from InvestingPro and InvestingPro Tips that investors should consider:
InvestingPro Data:
- Market Cap (Adjusted): 10.43B USD
- Revenue Growth (Quarterly) for Q4 2023: 3.0%
- Price, Previous Close: 4.32 USD
InvestingPro Tips:
- Rakuten Group (RKUNY) holds more cash than debt on its balance sheet, which is a positive sign for investors looking for companies with a solid financial footing.
- The stock is currently trading near its 52-week high, reflecting a strong return over the last three months, with an 18.47% price total return in that period.
For investors seeking a more in-depth analysis, there are additional InvestingPro Tips available on Rakuten Group, including insights on the company's dividend history and liquidity. To explore these further, visit https://www.investing.com/pro/RKUNY and remember to use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 11 additional InvestingPro Tips listed for Rakuten Group, which can provide valuable context and guidance for your investment decisions.
Full transcript - Rakuten ADR (RKUNY) Q4 2023:
Operator: Thank you very much for joining us today. Now, I would like to start Rakuten's Group 2023 Full Year and Fourth Quarter Financial Results Meeting. We have disclosed the latest consolidated financial report at 3:00 PM today. You can view this data on our corporate website page for investors. And in terms of audio and video, if it’s interrupted, please in the bottom there is a button where you will be able to utilize other streaming service. So now without further ado, we'd like to invite Mr. Mikitani.
Hiroshi Mikitani: Hello, everyone. And despite your busy very schedule, thank you for joining us for the FY 2023 fourth quarter and full year consolidated financial results meeting. Thank you very much for your kind participation. So first of all at the outset to the victims of the 2024 Noto Peninsula earthquake those who have been victimized and the family members, we would like to extend our heartfelt sympathy and support to all of you. So without further ado, 2023 full year and the fourth quarter financial results, we'd like to offer you the summary. So first of all in terms of consolidated operating results. The sales and revenue is as you can see, the fourth quarter is 3.3% positive. And there has been a lot of optimization that has been conducted in various means and consolidated non-GAAP EBITDA is JPY74.5 billion positive. So it's increased extensively significantly for EBITDA base, and in each of the business as you can see on this matrix, so internet services segment consolidated 5.9% increase and FinTech is 10.4% increase and Rakuten Mobile 12.6%. But with that being said, Rakuten Symphony, a large of course significant deal has been conducted. So there are some deviation in terms of the reflected on the ledger books in the month. So non-GAAP internet services segment is 33.9% and also FinTech, 34.7% and Mobile is minus 71.2%. So that has been the result. So as a result of that, the non-GAAP operating profit, the fourth quarter minus JPY3.6 billion. So year-on-year on the same quarter, it has been an improvement by JPY69 billion. So in terms of the IFRS, operating profit this is JPY54.5 billion positive, so JPY55.4 billion. So non-GAAP EBITDA is JPY74.5 billion, and has been improvement by JPY74.5 billion. So there is a significant improvement that has been made that we had been able to deliver. And in terms of the consolidated revenue as you can see here. So since the establishment 27 consecutive month, we have been able to turn positive. So JPY2.07 trillion, we have been able to achieve. So respectively in detail if you can follow, in terms of consolidated EBITDA, so as you can see continuously there has been an improvement. But last year spanning 12 months, the various optimization that has been extended, we have been able to surplus achieved JPY75.5 billion in terms of EBITDA. So on top of that in terms of non-FinTech, the fourth quarter for this as you can see again achieved surplus on an EBITDA basis. And in terms of non-GAAP operating profit, so last December while we'll be describing this in more detail, but it's JPY21.2 billion in terms of positive. So non-GAAP operating income we have seek also profitability in this segment as well. So why has it been returning to a positive environment or internet service segment, the improvement? Compared to two years ago in the fourth quarter, it is positive by 18.9% and FinTech segment also improved by positive 13.2%, and Mobile segment improvement by JPY36.6 billion positive. So the other detail of course is plus by ¥400 million, but all the segment overall, we have been able to improve the profitability. And 2022 in terms of the fourth quarter, non-GAAP operating profit of 72.6, the fourth quarter last year is ¥3.6 billion. So in terms of what we are going to achieve this year. So first of all, so full year and consolidated non-GAAP operating profit, we're going to try to achieve profitability. Last December, we have achieved profitability in a single month of last year, but we like to make sure that this is going to be achieved throughout the full year. And the other is that the cash management, we have not been putting a lot of emphasis in those areas. But the various of course project to capitalize. And based on this higher better circulation of cash is going to be achieved. And also as many of you are looking in terms of non-GAAP EBITDA for Mobile, we are going to also make sure that within this year, we're going to turn this into surplus. And at the same time, the other area is how are we going to leverage AI which is going to be a key factor moving forward. For Rakuten Group, we have the so-called Triple 20 in terms of achieving a 20% increase in marketing productivity and also another 20% increase in operating productivity and client productivity, in other words meaning that clients' operating efficiency is going to also increase by 20%. So in the midterm, this is going to be our goal. And in terms of financial strategy, if I may, this month, in terms of the senior bond has been issued dollar-denominated. So 2025 refinance risk has therefore has been overcome and addressed and 2025 and after free cash flow will be secured. And at the same time, the various of course improvement in terms of the funding 2024 and after financing status basically is not a concern. So from here onwards, I'd like to explain by segment. First of all, domestic EC market EC business. So three-year CAGR has improved by 10%. So we have now achieved ¥6 trillion especially Rakuten Ichiba and Rakuten Travel. Rakuten Ichiba, our three-year CAGR is plus 8.1%. Industry average is 3.5% which means that more than 5% we have overachieved the industry average. Whereas for Rakuten Travel, in 2019, that is pre-COVID as you can see, the GTV has increased by 42.5%. For industry, unfortunately is minus 9.5% which means that the difference is more than 51%. We have been growing in excess of 51% compared to the market. And also ad business revenue. Industry average is 2% and we're growing at about 17%. And card shopping Rakuten Card has been growing nicely. So three-year CAGR is 22.6% whereas industry average is 13.4%. So in excess of 9%, we are growing faster than the average. Yesterday, we disclosed the financial results and Rakuten Bank, the bank deposits outstanding as well as revenue is doing a very good job. And for Internet Service if I may revenue year-on-year basis 9.8% growth. So now we have achieved ¥1.2 trillion. It's a big number. As for non-GAAP operating income grew by 18.9% year-on-year. So now we're at ¥76.8 billion. That is the level of operating income that we have come to achieve. So there are costs that we incurred and minority investment businesses. Yes. If we exclude those factors, then our operating income would have grown by 23.6%. As I mentioned about GTV, quite successful and ad business has high profitability, so now it has achieved more than ¥200 billion. So that's up by 12.9% year-on-year basis. And we've done a lot of initiatives. So of course, support from the government and changes in the hometown tax rule and SPU-05 rule change took place as well. And here, sustainable point strategy is something that we wanted to put together. So basically, more than 80%, they do have points. But for heavy users, we revisited somewhat. And also this year, at Shinshu Conference, we made an announcement back in 1997 in the world, for the first time, we were the first one to come up with B2B2C market. And now this has evolved with various services organically, connecting with each other, it has grown to become an ecosystem. And from this year onwards, we are trying to evolve further into AI empowerment company. In that sense, last month, Rakuten Ichiba, we changed -- we announced that there will be a change in monthly merchant fee. So we would like to improve GMS and also reduce the operating cost of the merchant. And for overseas business, back in 2022, in January, Ukraine was invaded by Russia and there was an impact on us as well, especially Viber. In Ukraine, the utilization rate was 97% or 98%. So it has been a very popular business. And also Russia was quite a big market for us. However, we lost the revenue from those countries. But we are quickly improving our revenue. Now, moving on to FinTech segment. Rakuten Card, Rakuten Payment, these two are leading the growth. And it says most services, but almost all of the major services are contributing to growth. Non-GAAP operating income with Rakuten Securities, Rakuten Bank, yes, they are the growth drivers. In terms of revenue, 11.2% increase year-on-year, ¥725.2 billion. It's quite a big business for us. And for non-GAAP operating income, grew by 36.8% year-on-year basis, and has achieved ¥122.9 billion. These are main KPIs. First of all, Rakuten Card, we have issued more than 30 million, so it has grown by 7.1%. And Rakuten Card shopping GTV or GMS, ¥21.1 trillion, so 16.4% increase year-on-year. And Rakuten Securities general accounts, the number of accounts have grown by 18.1% year-on-year basis. We have now exceeded 10 million accounts. And also deposited assets, it is now ¥25 trillion. So that's an increase of 37.7% year-on-year basis. So apart from commission fee, the trading fee, we have been able to successfully increase our revenue. So first of all, Rakuten Card, as I mentioned earlier, we now have exceeded 30 million, ¥21.1 trillion, and GTV, 23.2%. And so our target is to achieve 30% share. And absolute value, we are trying to achieve ¥30 trillion, especially the operating income. As I mentioned, optimizing our point program, point initiatives. We've carried those out. So non-GAAP operating income for fourth quarter was ¥15.1 billion so that's a 63.6% year-on-year basis and operating income from 11.6% we have now grown to 17.7% a big improvement. For Rakuten Bank yesterday when we announced financial results, yes, it was announced but very briefly ordinary income 13.3% increase. So that's ¥101 billion ordinary profit 23.4% increase ¥35.2 billion. And, especially, ROE this is now 13.9%. So compared to other banks, yes, we have been enjoying high ROE. And in terms of number of accounts in January, we have achieved more than 15 million total deposit balance ¥10.3 trillion. G&A expense ratio 42.9%. Capital adequacy ratio 11.1%. So capital efficiency is very high with a high ordinary income and ordinary profit. Next moving on to Rakuten Securities Holdings. So called in kind -- well transaction of stock now it is zero commission trade, and because of this with a non-consolidated basis ¥560 billion decrease -- 568 as it says here. And down by ¥2 billion for commission. But – however, trading income financial revenue all included. So as a result Rakuten Securities holdings, yes, it may have been a concern. However, the operating profit was ¥3.678 billion. But now this year we achieved ¥3.813 billion and the number of accounts has been increasing. And domestic stock trades it's now zero commission and the general accounts is increasing. So now we have achieved more than ¥10 million. But not only that accumulation type investment trust roughly a ¥15 billion -- excuse me ¥150 billion. So, yes, I have seen an improvement. So starting from this January there's a new NISA program that has been implemented. Therefore, we have been able to enjoy a good trajectory of sales. In terms of Rakuten Securities domestic is 34.4% market share so 4.7 market share. So therefore continuously we would like to expand on this market share. So next is Mobile segment. So Rakuten Mobile. In terms of revenue and also non-GAAP operating income EBITDA all are on an increase and Rakuten Symphony and Rakuten Energy. The operational cost optimization has been achieved. So therefore we have been able to far expand the revenue. In terms of -- we have revenue of ¥364.6 billion plus by 3.9% year-on-year. And non-GAAP operating income last previous year we have been able to improve by ¥141.7. So in other words overall throughout the year it was ¥337.5 billion negative but quarter-by-quarter we have made a major stride in improvement. Non-GAAP EBITDA again ¥159.9 billion plus improvement on a year-on-year basis. So this is in quarter-by-quarter the graph as you can see already the non-GAAP EBITDA in year 2022 the first quarter it was minus ¥92 billion. But now the fourth quarter of 2023 it is minus ¥29 billion. So MAU service again is also increasing and accelerating the number of subscribers is 609 million. And the backup, of course, is still within this. But again in terms of 5.96 million as a backup, but still of that the -- it is high of 6.09 million. And also the attrition rate or churn rate is going down significantly, so 2023 the cost reduction was our main objective. On a monthly basis, we had been able to reduce the cost by minus JPY16 billion. So Symphony Rakuten has been supporting the first open run network in Europe 1&1 has started in Germany. And in terms of the mobile, I would like to show you the transition of where we are at in this phase, development for the strategy moving forward. So in many ways there has been a lot of debate for us. There are two things, one is that for this business there are social benefit that we will be able to bring about. And the second is a new technology and Rakuten ecosystem will be leveraged. By doing so, we would be able to create a revenue business model that's quite different from the others and Rakuten Symphony we are going to transfer technology. So it's three phase. So in other words it is one stone with three birds. But with that being said without the network this is going to be undermined. So there is a quite aggressive ways and means in 2022 to 2023. We had been able to expand the foundation by 2020 to 2022. So we have been making major investments in this phase one. And, of course, we have been able to achieve 96% population coverage and now 99.9% plus we have been able to achieve the coverage of population to this level. By doing so, we are going to utilize virtual technology. Many of the mobile phone telecommunication companies are now looking to ORAN and this is going to be the de facto standard by utilizing virtual technology. So Rakuten Symphony, Rakuten Mobile had been spearheading this whole effort altogether and we have been the frontrunner. And last year, we had been quite audacious in making investments. So we need to make profit out of this meaning that we decided to conduct a diet so lean operation. So monthly, of course, cost we have been able to reduce this by JPY16 billion. And at the same time with KDDI (OTC:KDDIF), we have a looming revision of the contract. So 99.9% of population coverage has been achieved. And also new marketing methodology has been implemented yesterday. We also had made a SAIKYO, strongest family program announcement. And at the same time B2B service for the enterprise institution, we have launched this service. So we have been able to see an increase in the numbers of subscribers and this year and after, we'd like to go into the next phase for growth. So in other words, the general users we'd like to increase them and also enhance the institution. So EBITDA is going to be in black and to be a domestic number one mobile carrier. So this is a phase in order to trail-blaze in creating the trajectory moving forward. And specific target as you can see in terms of subscribers target there are some, sort of, width, but 8 million to 10 million and ARPU is JPY2,500 to JPY3,000. The cost as of now, we would like to contain our costs as much as possible as we have done and that I think is going to be the key to success. In terms of the subscriber acquisition, we have stopped zero fee and it's again coming back to the original growth trajectory once again. So we have various surveys that's been conducted. We have third-party institution that help us and, of course, price and awareness, it's Rakuten Mobile with price. And also in transition into other mobile we are number one candidate. And also satisfaction level is also number one. And in terms of the quality of the signals, no signal availability as you can see here is that we have made a major improvement in this area. So, A, B, C companies, as you can see in comparison, is quite close in terms of no signal availability competitiveness. So, the latency, this is literally latency, like when you're looking at YouTube, how can you be snappy in looking at YouTube? We are already second in the industry. So, we have high-quality network that we have been able to offer to the community as a result of that after adjustment. So in one month, those people who are aggressively going after the points and the churn rate, is 1.1%. So 7% at time was the highest. But compared to that, there has been a dramatic improvement, that's been made. So we believe that, this is going to be an important KPI for customer satisfaction. So, at the same time, being subscribed to our mobile network and the fact that the churn rate is dropping, that of course, equation is both important the increase and the decrease of churn rate. And also, in terms of the -- some of the -- of course churn rate or the technological aspect is reducing. The network-related churn is declining. And new roaming network optimization with KDDI has been concluded. And there has been some time lag. But for the metropolitan area, this has been already finished and completed in the month of February. And besides, from the other areas, so to speak of, is already we have been able to complete the first phase. So those users, the network itself has made a major improvement. And that is something that they are feeling, and we believe that we'll be able to make further progress in this area as well. And as you can see here, area-by-area in terms of quality of connectivity, this is a detailed transparency. So 21 prefectures the connection is the best, is the result that we have been able to be evaluated. So the end users, there may be some gap, but we believe that we'll be able to improve the recognition and awareness about our brand. In December, in terms of subscribers, it’s the end of the year, so therefore, there are big of course deals, that's been concluded. Excluding these big deals, we have been smoothly increasing the number of subscribers. At the same time, as I've mentioned, the ecosystem enhancement, which is one of the three goals that we have hosted, so Rakuten membership and Rakuten merchant and there’s the number of, of course, the users, so to speak of, we'd like to increase the numbers overall. And just as a reference, the Rakuten Mobile, by joining Rakuten Mobile what effect would you be able to enjoy is in the center Rakuten Ichiba, the GMS is per user base is about 60% plus meaning that more purchase are being made on Rakuten Ichiba. In Rakuten Travel, GTV, it is close to double the usage or spend on Rakuten Travel. And towards the right, once you become a subscriber compared to before subscribing 2.56 average increase in service usage of MNO users in one year. So, in total 13.3 million more users, so -- 13.3 million services. So, group overall contribution was ¥10 billion and EBITDA ¥6 billion. So, that's a total of ¥24 billion EBITDA contribution. So, we are adding lot of services. First, referral campaign has been upgraded. Those who subscribe Rakuten Mobile, if he or she introduces somebody, then you can get 7,000 points. And for MNP transfers, 13,000 points, and if it's a new member then 6,000 points. These are the points given. And from yesterday, it has been well accepted SAIKYO Family program. So basically, up to 20 lines and fee will come down by ¥100 up to 3 gig, then ¥880. And a referral campaign you can combine, so which means that a family of six and then in total you'll be able to get 100,000 points. And if you are using unlimited data and voice, then within a family, you'll be able to save about ¥360,000 per year. So, this will be a great benefit for the users. And when it comes to B2B, so for corporate subscribers, so we are accelerating going after major companies. And by area we have put together team and gaining Rakuten Travel and Rakuten Ichiba merchants, we are gaining their support to enhance acquisition. And also through agencies and resellers we hopefully like to increase acquisition. And for ARPU, because of the increase in B2B, it is roughly ¥2,000 now and going forward, we will enrich services even more so that we will be able to achieve in the range of ¥2,500 to ¥3,000. For cost reduction, let me explain at this point. And dramatic decrease has been achieved over the year ¥39 billion per month and we promised that we will reduce this by ¥16 billion. But more than what we had committed, it is now ¥23 billion. So, in total that is the reduction by about ¥200 billion. And in terms of investment with a new roaming agreement using KDDI's network that included, so the CapEx has come down significantly. So, for the future, the Platinum Band, yes, we are virtualized so dramatic cheap fee can be achieved. And finally, about Mobile, so this is an important point that I would like to make. And there has been a discussion about NTT law recently and I would like to make a brief comment. Rakuten Mobile with the introduction there has been price competition. Meanwhile, so unknowingly, should I say, but NTT DOCOMO with NTT Group has become 100% subsidiary. So, there has been a vertical consolidation -- very strong consolidation and very broadly, very cheap, and with freedom being able to access to wireless. In order to create such kind of environment, NTT has, of course, succeeded the -- a national asset like buildings utility poles and pipelines. And the optical fiber utilizing these assets should be accessible by everyone in a fair manner. And of course this is governed by NTT law. So, in other words this is like a constitution of communication industry. So, to abolish this NTT law is very dangerous. So, it may lead to NTT coming back to their original position. And now the mobile phone charges have come down but once again it may go up, which means that this will lead to an increase in the burden of the users, the general public. So, very prudent discussion is necessary. LDP and MIC should not nonchalantly discussed, but it should be discussed within the public domain. So now from here onwards, I'd like to shift the gear a little bit to talk about financial strategy. So I'd like to hand over to our CFO.
Kenji Hirose: [Foreign Language] Hi. I am Hirose, in charge of CFO. Let me talk about financial strategy. So as Mikitani-san mentioned, we have addressed fiscal year 2024 bond risk and we raised 1.8 billion of USD-denominated senior notes. And last December there was ¥60 billion of Rakuten Securities. So we have secured necessary cash up to this point. And also with the issuance of bond the demand for new senior bond has exceeded US$10. So this showed that we have a stronger investor base. So now you can see the three pillars of our disciplined financial policy. So we are seeking financial soundness in the medium-term. But first profitability improvement and regarding this year non-GAAP operating income, annual consolidated profitability and also on a monthly EBITDA basis, we should bring Rakuten Mobile to profitable this year and also 2025 as well. And also efficiency improvement we have engaged in company-wide cost reduction and SPU revision. For this fiscal year we are improving working capital and further productivity improvement with AI. For financial soundness, we will -- we have reduced interest-bearing debt. And we also worked proactively to manage debt maturity. And going forward, credit rating improvement, the consolidated equity ratio of 10% and non-FinTech net debt -- non-FinTech EBITDA five times with this target we will make sure to make our finance sound. And you can see the track record of equity financing and divestiture. So we have in April Rakuten Bank's IPO followed by an IPO third-party allotment of Rakuten, Seiyu Stake was sold and Rakuten Bank additional sale and Rakuten Securities followed. So going forward, we would like to also make sure that we do monetization of capital portfolio and improve working capital. And as you can see for the necessary fund we will self-fund. That's our basic policy. So cash flow, FinTech and with the working capital we will self-fund and accelerate self-funding going forward as well. And for the bonds that will mature in 2025, as quickly as possible we would like to proactively manage. And the retail bond refinancing there has been some concern raised. However, our basic policy is that, as much as possible reduce the debt. So we have been doing that as much as possible. And part of retail bond will be refinanced. We will consider that. But as you know, the retail market or bond market in Japan has depth. So we believe that the market should be able to refinance our bonds. And as you can see there has been some large financing by a company with the same rating as us. [Foreign Language] And 2024 in terms of the final of course bottom-line, in terms of increase of expense and also reflective of interest rate and the bank bond in terms of the concern that they have, but based on that non-GAAP operating profit in terms of making sure that the operating income is going to be significantly improved. So we're going to make sure that in terms of the major improvement will be made on this term's profitability. And I must say but in terms of the dividend, I feel regrettable to the fact that it is going to be zero. So our most important priority is to establish a sound and robust foundation of finances in terms of return to investment-grade rating, reduced cost of capital and enhance shareholder value. By doing so, we'd like to further enhance the shareholders' of course asset. In terms of the benefit plan for the shareholder, we have made an announcement to make change in this. All the shareholders Rakuten Mobile service, in order to enhance understanding of our service offering, the shareholders, 30 gigabyte per month. And voice data, we'd also like to offer a SIM card and would like to provide them to our shareholders. And that will be all for the financial strategy. Now I would like to move into the AI strategy. Ting-san, please.
Ting Cai: Good afternoon, everyone. I'm Ting Cai, Chief Data Officer for Rakuten Group. AI is touching every aspect of our lives. And today, I'd like to share how we are infusing AI into everything we do at Rakuten in an effort called AInization. Our vision is to augment human creativity with the power of AI. Rakuten is uniquely positioned to fulfill this vision because of three core strengths. First is our unique data, which includes customer context from billions of interactions, domain knowledge from years of experience and world knowledge from our collaboration with OpenAI. Second is our ability to reach millions of people online and off-line including 6 million locations where Rakuten Pay, Rakuten Edy and Rakuten Point Card can be used in Japan. Lastly is our execution capability to build a growth flywheel, where every interaction is started with AI, reviewed by professionals or validated by customers. This unique combination of artificial intelligence and human intelligence helps to make our models faster and cheaper with every interaction. These strategies come to life in three waves of execution. In Wave 1 we built a deep learning platform. One of the key technologies enabled by our deep learning foundation is semantic search which uses AI to understand what you mean not just what you say. We launched this technology recently in Rakuten Fashion and saw immediate impact. We're building on that success by rolling out semantic search for Rakuten Ichiba. Here we're able to reduce the zero hit ratio by 98.5% and show more relevant results for our customers. Search result clicks increased 6.8%. As a result, users are searching more and purchasing more. The most important metric on this slide is the smallest number 0.2% increase of session per user. I have worked on search for many years. This metric is so hard to move. This means users are happier with our search experience and are coming back more often. They are becoming our fans. That translates to more sales for merchants and more revenue for Rakuten. It's great for everyone in the ecosystem. We're looking forward to bringing this technology to all our services soon. As I said earlier, AInization is brought to life in three waves of execution. We completed Wave 1 with the deployment of our deep learning foundation and several successful launches including semantic search for Rakuten Fashion and Rakuten Ichiba, as well as deep learning-based recommendation for Rakuten Rakuma and Rakuten Ichiba. Now we are ready to scale deep learning to all Rakuten Group services. In Wave 2, we unveiled the Rakuten AI for Business Platform in November of last year and recently announced Rakuten AI for merchants and Rakuten AI for hotels. There's more to come on this front. In parallel, we are incubating Rakuten AI for consumers, with the latest advances in Gen AI in Wave 3. We believe Rakuten can lead the way and empower everyone with Rakuten AI. We are committed to bring value to our business partners to all our services and benefit our customers and improve marketing operation and client productivity. Good afternoon, everyone. That was – last week I was in San Francisco meeting with OpenAI and other high-tech team and I was concerned that I may not be able to make it back to Tokyo for this important meeting. So I thought about hiring a professional but it would have been very expensive and time consuming. So I recorded a 30-second video submitted a transcript and AI generated this video for us. This is only one of the examples how we leverage AI to improve productivity. At Rakuten, we are on the journey of AInization. Thank you for joining us. Let's – I hope to build the future with you. Thank you.
Hiroshi Mikitani: So this was the true Ting-san or virtual Ting-san. We don't know. But Japanese is in a way a little not fluent but I have my own version of AI. So I would like to run this video as well thank you. [Video Presentation]
Hiroshi Mikitani: Thank you for that. And this is real me presenting. This may be my last day to present on a real basis and we create this AI avatar of mine. So that concludes -- I'm sorry for a very lengthy presentation, but we would like to conclude our part of the presentation. Thank you very much for your kind...
Operator: [Foreign Language] Thank you very much for joining us for the FY 2023 fourth quarter and full year consolidated financial results meeting. So from here onwards, we'd like to accept questions from the media. So today there will be seven people who will be appearing to answer your questions. And for Q&A today these will be the proceedings. So there will be simultaneous translation into Japanese to English, English to Japanese. [Operator Instructions] So the questions we expect accepting only regarding the financial results. [Operator Instructions] News Picks, Hatani-san please.
Utai Hatani: Utai Hatani from News Picks. Thank you. There are two questions. One is the mobile ARPU. First time the quarter-to-quarter basis it has been declining from the last quarter the ARPU. But as Mikitani-san mentioned ¥2500 to bring to ¥3000 what are the road map in order to bring this ARPU? This is the first question. The second question the overall of course revenue and it needs to be a two-digit percentage in terms of growth that had been enjoyed 7.8 compared to the past. It seems as though the growth rate is a little slow. So what is your explanation on this?
Hiroshi Mikitani: Well, first of all, this is B2B, the corporate or institution has been the major deal and which has been a major of course effect, as you can see the effect on the slide. The others it's growing very smoothly and soundly. ¥2500 and above bringing to that level then more additional services have to be offered. And at the same time we'll not be able to disclose all the strategy and tactics, but there are some of course programs that we do are preparing to launch. Especially ad, of course, revenue in the Link is going to increase. And we believe that is going to take place and already for iPhone basically it's going to be open on RCS. So there will be some revenue that we'll be able to drive out of this. So we have high expectation on this. So in the future per PET capita JPY 300 per month in terms of ad revenue is what we are trying to achieve. And we would like to do most. In terms of growth rate, well, basically as I had mentioned in my presentation, the revenue and also the quality of the services, we have various marketing programs and as a point optimization program and making significant improvement. And in terms of hometown tax that was in September, the hometown tax have completed its one phase. And the effect of that there is a hard sort of buying at the very last minute. And that has been a major impact. So, therefore, at Q3, the third quarter the hometown tax the sales in terms of the transaction and the card commission those had been reflected on Q3 and brought forward in other words. So that is the biggest of course reason why.
Utai Hatani: Thank you very much. That's all for me.
Hiroshi Mikitani: Thank you.
Operator: Thank you. So we have a hand, Yomiuri Shimbun. Ono-san [ph] please?
Unidentified Analyst: This is Ono. I have two questions. First, yesterday you made an announcement about a family program and minus JPY 100. This will be negative on your ARPU. So what is your target? You are trying to increase the number of users? And also B2B, you are successful. But for B2C, it seems like you have room to grow. What is your take? And number two regarding the finance -- refinancing you had made announcement the other day. And for this year the financing, equity financing so now you have concluded and will not do the similar financing for some time.
Hiroshi Mikitani: Well, for Rakuten Mobile, I have been approaching various people to sign up for Rakuten Mobile. And well we have a family plan of SoftBank (TYO:9984), KDDI or DOCOMO. So there were quite a few people who responded in such a way. So I mentioned that why don't you transfer as a family? So perhaps younger people when it comes to data usage, I think, they use more data. They use Instagram games, TikTok and so forth. So young people in order to attract these people, or if they use, it's 2,880 and also unlimited call and voice and so forth. If you think about it then ARPU will not necessarily come down. And I'm sure there are people who have signed up for family plan. So, the fee is JPY 100, yes, with four people using referral program then the first person can get 13,000 points, and then it will be 20,000 points for second, third, fourth family member. So that's in total 73,000 points. As a family, you'll be able to get these many points, so which means that it is quite significant. And once you start to use this service maybe one or two people within the family are using unlimited service and this JPY 5,000 will become much cheaper. So this is quite impactful. That's all.
Hiroshi Mikitani: And regarding the finance, let me respond. For this fiscal year -- so asset monetization. Regarding asset monetization, yes, we are considering flexibly. But those equity financing, which will entail a dilution, yes, as you said, right, we do not have any plans at this point in time.
Unidentified Analyst: That all. Thank you very much
Operator: Freelance Ichino-san [ph]. Thank you for raising your hand. Please.
Q – Unidentified Analyst: Thank you. My name is Ichino [ph] I'm a freelance. So in terms of the Saikyo Kazuoka program, the strongest family program, you talked about ARPU -- effect on ARPU. But the churn rate, I think is going down at the moment. But are you expecting to further reduce the churn rate? Do you have that expectation from this program? It's the first question. And the second question is again, -- I'm sorry, again regarding ARPU. So in terms of target of JPY 3,000, if you exceed JPY 3,000 meaning that everyone is going to utilize them to the maximum level. At the same time, have them participate in the options. So as an option, I believe your service for the option offering, is a little limited. So are you going to increase the option until you have the plan to do so? So, Mikitani-san you mentioned, you have hinted that alluded that. So if you have any thoughts, please I would like to know that in detail.
A –Ting Cai: The Saikyo Kazuoka program, the strongest family program, the effect of that please. Well, thank you very much for the question. As Mr. Mikitani mentioned, many people have the so-called family discount program. And as you may know, our company Rakuten Mobile, the most effective of course, a path for acquisition of the users referral campaign. And there's a referral campaign there are already 250,000 under the referral program. And this user, approximately 49% has introduced the families. And this strongest family program Saikyo Kazuoka program, this is going to further accelerate. So as a result of that, in terms of acquisition rate will go up. And as we mentioned, the lifetime value it's going to be effective for reducing the churn rate. Because of that as a result, the overall effect on the ecosystem, could also be achieved. So that is the nature of our program. And the other options, well, I must say as you have pointed out, there are several option that we are considering as of now. And like the other companies program, but something that is unique to Rakuten, we also like to offer additional programs. So, if you kindly be patient with that. Thank you. That will be all.
Hiroshi Mikitani: If I can add, in terms of ad revenue, it could be enlarged quite extensively. So within the Link, there are a lot of different promotions, utilizing AI and I think it's going to be quite a significant portion of that.
Q – Unidentified Analyst: Thank you very much for the answer. Thank you.
Operator: Next, yes, from NHK Nishigata. Nishigata-san [ph]
Q – Unidentified Analyst: Yes, this is Nishigata [ph] from NHK. I have one question. Mobile cost reduction is my question. In 2023 in December on monthly basis, JPY 16 billion decrease. So going forward, cost reduction pace, so are you going to maintain this reduction rate? Or the current investment will it be maintained? So, can I ask for your comment in this regard?
Hiroshi Mikitani: Yes. This reduction of JPY 15 billion, this has become a standard. So this level, will be maintained and at the same time further cost improvement initiative is already underway. So per person, including per user cost reduction, we will maintain the level of December. And this year we would like to reduce 10% or 15%. And the initiatives are underway.
Unidentified Analyst: Okay. Thank you very much.
Operator: We do have time limitation. So we will take a final question from the media. Yes we see a hand. Ishikawa-san [ph], a freelancer please.
Unidentified Analyst: This is Ishikawa, I'm a freelancer. This time you've launched a family program and other companies with new NISA, they have come up with a new plan including financial products. So you have banks and securities. So are you considering any mobile plan including those financial services? And also KDDI has invested Lawson. And if you could comment about this case although this is irrelevant from today's announcement.
Unidentified Company Representative: I am Osaka [ph], in charge of finance. And yes new NISA is gaining traction. And, therefore, going forward combining with our mobile, yes, we are thinking of starting to consider about potential offerings.
Unidentified Company Representative: And one more thing. Late last year, it was quite successful but card and mobile tie-up, so adding 30,000 points including TV commercial films. This was aired we promoted and this was quite successful in two fronts. One was this is a new card members through mobile, they have signed up. And also Rakuten Card, the current card members they have now have signed up for mobile, so they can get 20,000 points. So this year throughout the year we would like to carry this out so that we will be able to strongly support mobile. Do you have anything to add?
Unidentified Company Representative: Well, for other competitors' strategy, we're not in a position to make any comments. So regarding Lawson's case, I will refrain from making comments. Thank you.
Operator: So that concludes a Q&A session from the media. Thank you very much for joining us.
Unidentified Company Representative: Despite your very busy schedule thank you for joining us for the Rakuten Group's 2023 full year and fourth quarter financial results. Thank you kindly for your participation. We'd now like to invite Q&A for analysts and investors. Today's presenters are the three members on the screen.
Operator: Following me for today's Q&A I would like to give you a housekeeping announcement. It is going to be conducted by simultaneous English and Japanese translation. So please select your preferred language from the Zoom (NASDAQ:ZM) screen. And do not select mute original audio. During the interpretation, the interpreter speech will be the main audio. At the same time, of course, the posted document will be in Japanese. If you do need English origin, please down them from the webpage. At the same time, if you have a problem, please click the raise your hand button if you're asking question, and also for the mobile users, please sound like detail and then select raise your hand. So if you are being appointed, make sure that you unmute yourself to ask questions. So now we'd like to open a Q&A session for the analysts and also for the investors. So UBS Securities, Mr. Kazahaya, please ask your question.
Takahiro Kazahaya: My name is Kazahaya from UBS Securities. Thank you very much for this opportunity today. I would like to ask two questions. The first question is that already there has been a question in media. The ARPU of mobile and the number of subscribers today, in the presentation today, it seems as though that 8 million to 10,000 million, excuse me, target are too low. It seems as though they're going to supersede this number of 8 million to 10 million. And the number of subscribers, if this is achieved, you talked about ad in terms of 1,500 ARPU. I think that is more realistic with the ad revenue. So for us in the future, 8 million to 10 million, how fast are you going to exceed this number? It's the area that we need to focus on. So once again, what would be your priority? I would like to ask what the priorities will be. So this is the first question. The second question is that this year, non-GAAP operating profit is going to be on a surplus this year and next year. The mobile business on non-GAAP EBITDA, you're also going to achieve surplus. So meaning that this year, in the consolidated EBITDA, you need to exceed 300 billion. And next FY, the EBITDA basis, you will be able to earn more. And with that being said, from this year to next year, the power and competency to earn profit is going to further accelerate, and especially in mobile, from here onwards. It seems as though the grandchildren will pay back to the original business. I'm sorry for the lengthy question, but in terms of the competency to earn, the fact that we can foresee in the next two, three years to earn more, Mikitani-san, from here onwards, what will be your interest? How are you going to navigate this company forward? I would like to hear that from you. So this is my second question. Thank you.
Unidentified Company Representative: The first question, again, in terms of the number line and ARPU, it really is a balance of that. Obviously, the effective ARPU increase, not just increasing the price, but effective increase of ARPU with a set of value needs to be achieved. So again, seeking for higher revenue. And the major strategy moving forward is, again, is ad revenue. So that's one thing. And at the same time, optical fiber, optical, bundle them together. And CPE, the Rakuten Turbo, utilizing Rakuten Turbo for one thing. And we need to achieve upsell and ad revenue. So ¥200 to ¥300, we're going to increase ad revenue and upsell 200 yen. We can increase them. So we believe that we will be able to achieve that goal. And in terms of the number of the lines, of course, we have seen a snowball effect, so to speak. So Rakuten, okay, it has a high coverage. And in terms of the points, you can accumulate good points. So that is not widely reckoned still yet. And that is a high probability. So we need to disseminate this information more widely. So we need to, in good balance, strike a good balance for this. And this time, in 2023, FY 2023, is simply Rakuten Mobile on a monthly basis, reducing them to ¥16 billion. But all the business, the sound growth trajectory and the revenue generation, EBITDA generation, I think it was a good opportunity for us to reflect back on our business model overall. And SPU, or zero after zero, the many users, they're extensive users. But unfortunately for us, there are many customers who are on deeply in red deficit. So we need to take appropriate measure towards that. At the same time, the other users, we need to bring a lot of benefit. And that will lead to higher, of course, top and bottom line. And in terms of financials, besides from what I have said, there are new initiatives that we are undertaking as of now. And for instance, that is in various ways and means, cash flow, the working capital has been improved. And in the past, we are cash rich company. So we did not work too hard in this area. But now we're looking into this very closely. And the other thing is AI. There are two things in AI. One is that our own deep learning machine -- deep learning and machine large language model LLM, we need to develop our own large language model. And the other is by utilizing leveraging, this more specifically, lowering the operational cost, seeking high productivity, and increasing the marketing cost -- best use of marketing costs. And the corporate, of course is increasing as of now. But there are many corporate parties who we transact with. And those people are more of e-commerce service or travel that we have offered to them. But in the future outside of that, let's say offering more better connectivity or offering AI. And we believe, we'll be able to do so. And that is our belief. So last, but not least Rakuten Mobile, the other of course ambition that we do have is that, all the software that we have nurtured we would like to sell them outside of Japan, because Japan software enterprises, there are a lot of large companies, of course, but they have not been able to achieve their objective. So Rakuten, the venture company is trying to achieve that goal. So Rakuten Mobile making sure that our business is going to turn into black and surplus. The next, of course, Rakuten Symphony the software that we have developed in a true sense, we would like to sell to the global mobile company. And we like to put our effort in those areas. Thank you.
Operator: Yes. We have a hand HSBC Securities, Neale-san. Please confirm that you are un-muted.
Neale Anderson: Thank you. Good afternoon. I have two questions, please both relating to Mobile. The first one is on the subscriber acquisition cost for consumers. Obviously, you've had a big change in strategy moving away from a store-based approach and television commercial. So I wonder, if you can compare what your per subscriber cost is say for this year compared to over the past two years where you had a different approach? The second question also is related to that. Can you update us on the status of the one-click sign-up? Is that now fully operational? Is that now how you're on-boarding most of your new customers? Thank you.
Unidentified Company Representative: Yes. I will not be able to disclose a specific numbers, but CAC acquisition cost compared to two, three years ago and compared to last year it has come to roughly 50%. We've been talking about ARPU and the number of subscribers. And we as we launched, the e-service it's close to four years and we have carried out various campaigns and initiatives try to acquire users and which campaign and which layer of customers can we reduce the cost and also get high ARPU. We have been analyzing. So going forward, I'm sure we will see further improvements.
Unidentified Company Representative: In reality, I need to guess because we do not know exactly what is their customer acquisition cost of other mobile companies are. But I suppose probably, it is definitely below 50% most likely like one-third of the cost of our -- especially for online sign-up. But Neale, I think our store is very, very strategic. And now when they walk in, they convert more close to over 70% of the people convert to sign up. So I think now our stores are super stores, and they are very, very efficient. And so we are selectively deciding where we should have a store and make it more efficient. What was the second question? Sorry.
Neale Anderson: It was on the one-click application process.
Unidentified Company Representative: One-click, yeah, yeah. Not the majority. Not the majority for sure. Maybe -- it's less than 20% -- around 10% to 20% I think. The challenge is still we need to clear with MIC that people who have Rakuten Card can also do one click. Now it's linked to Rakuten Bank and also Rakuten Securities scanner. So we'd like to expand to Rakuten Card and we are in the negotiation with MIC to do it. But on top of that I still believe our UX for the sign-up is a little bit complicated to be very honest. So I'm in the process of improving this conversion rate on the app as much as possible. So we need to really improve UX with this sign-up which we're going to do within our months or so. So I'm hoping that our conversion rate will dramatically improve.
Neale Anderson: Understood. Thank you.
Hiroshi Mikitani: [Foreign Language] Thank you.
Operator: So CLSA Securities Oliver -- Mr. Oliver please make sure you unmute yourself and please ask your question.
Oliver Matthew: Thank you. I have two questions. First question on Mobile. I've been using the service reception is very good in Tokyo, thank you. But I'd like to check what you mean about the ad revenue. I don't really see ads. So I'd like -- could you explain more about how it works or how you think it will work? That's the first question.
Hiroshi Mikitani: Oliver, you use iPhone right?
Oliver Matthew: No, I'm actually using the Xiaomi (OTC:XIACF) RedMi. Sorry.
Hiroshi Mikitani: No. So now we introduced the rich communication service called Link. So people who call on Link, who message on Link it is SMS and also the free voice. And then in exchange we have two things. We can utilize their data. And also we will be able to display the ads. And we are really personalizing ads on - based on our CNDA database code. We have a consumer database for everybody and there Rakuten each display ads are connected. Number one. And we are sending so much traffic to our ecosystem. And if you calculate that [Foreign Language] so if you calculate the gross revenue we are making from our ecosystem it is already ¥2,769 which is we are not counting as our ARPU. So maybe we can make this like affiliate model a little bit and because we are sending -- creating a lot of the value through the other services. So basically ad is -- and also we periodically send an e-mail to Rakuten Mobile users. In the future probably we will integrate the Rakuten Pay SDK into Rakuten Link app. So Rakuten Link app will become super app for Rakuten ecosystem. There are so many display opportunities because 40 million people a day will come to our website. And we also can include the Link. And I should say, I assume the line ARPU which most of the money is coming from ads and maybe some will understand it's about ¥300 per sub I think. So I think it's kind of a reasonable to say we can probably get close to what noise making using our data and the engagement level.
Oliver Matthew: Okay. So I get it. I haven't been using the Link app.
Hiroshi Mikitani: Please, please, please use it.
Oliver Matthew: Okay. Second question. Could we hear your thoughts about the e-commerce...
Hiroshi Mikitani: You can get free voice. Free voice.
Oliver Matthew: All right. Thank you. For e-commerce could you talk about your thoughts, trends in the market and these logistics issues? Do you think they're going to have much impact on the general market or Rakuten specifically? Thank you.
Ting Cai: So during 2023 we had many, many things coming in. So the one other thing is the post-COVID. So the travel industry goes up but on the other hand the purchase behavior is not so grow as it were during the COVID time. But we had a very great ecosystem to cover everywhere. So our total GMS regarding e-commerce related is going up. But on the other hand, there was a big, as I said, a hometown tax difference, which we've changed the regulation from September. Japanese people are very keen about such kind of changes. So they rather want to spend at the end of the year, but spend on the end of September. And also, there are several other things that we have to cover is the climate. The Japan this year was very warm temperature. So the seasonal changes, which may happen during autumn to winter did not happen radically. That means the consumption for regarding the preparation for the cold weather like a fashion or a home kind of -- home alliance kind of thing did not sell well compared to the other years. And also the big electrical refrigerate -- the warm appliances did not sell well. But we did many things to cover it. So that's why we are ahead of others and we kept such kind of slow, but still moving forward. And for this year, we have several challenges to go over. Especially, it's safe to have a big logistic crises, not crises, but changes in 2024. So in order to adopt that we have been already preparing such kind of changes with several merchants to get the very high-quality last one mile delivery. And in order to do that most of the merchants are already under the preparation and we will start such kind of very user-friendly such as scheduled delivery or drop it delivery or door front delivery or such kind of level actions to enhance this e-commerce. And regarding travel inbound is coming. So we are now doing with hotels and many other travel agents -- travel industry people to accept most of the inbound travelers with more high average rate. So these are the things that we are doing.
Oliver Matthew: That's great. Thank you.
Hiroshi Mikitani: The logistics I think the fact that we made a very big strategic alliance with JP is really meaningful and we can jointly develop more efficient approach of delivering the product like the bundling the delivery again just how to go at -- drop it at door front. And the fact that the marketplace makes sense, because we have so many different variety of the product, but we have a possibility to improve the delivery operation. So I think that's going to be our advantage. And warehouse management, we wanted to really make sure that we are proceeding automation as much as possible, so that we do not need to ask people to begin pack. So that is going to be also the key. But I think the fact that we made this massive investment for logistics including building I think now six big warehouses all over Japan is going to be very, very more or six China some of the order. The big ones are six, but we have more than that. So it is very, very important for us.
Oliver Matthew: Thank you. No one mentioned raising the bar for the kind of free delivery cost so that you're happy at the current level minimum order for the free delivery?
Hiroshi Mikitani: We do not have any plan to raise up the free shipping line, which is not reinforced to the merchant, but highly recommended. And for the new merchants we made it mandatory that in -- we except Hokkaido and Okinawa, people buy more than ¥3,980. The shipping fee needs to be free and included.
Oliver Matthew: Thank you.
Operator: Thank you. Due to time limitation, from the institutional investors, the next question will be the last question. BofA Securities, Nagao-san, please.
Yoshitaka Nagao: Hello. This is Nagao. Thank you for pointing me. I am from BofA Securities. I have two questions. I'm sorry to be -- particular, it's about ARPU. The idea towards ARPU seems to be changing at Rakuten data, voice, so communication ARPU is being controlled at a low level, but building ad ecosystem ARPU, I think there are -- is of describing, but other competitors cannot do. Perhaps you will be putting together ARPU strategy where only Rakuten can do. So, I'd like to know about the way forward, the idea towards ARPU? And second is carrier competition. Competition was based on price, the quality or internet services. But now, you have the additional big piece of finance. So you seem to have stronger competitive advantage. So, I was wondering how you are to combine finance -- the financial service and telecom, the mobile.
Unidentified Company Representative: Yes. I think it's okay, where ARPU comes from. But data-heavy users, we're seeing more and more. So, we would like to have more ARPU from data as well. And the main difference -- one of the difference compared to other competitors is that, whether or not we can monetize the data that we capture. So, in a sense, this 25 million or 20 million these royal users, if we can create the customer base then the ecosystem of Rakuten will become solid. And maybe up, achieving a revenue of ¥1 trillion will be possible in the future. So, in the mid-term, okay, are we going to gain profit from mobile. Maybe outside of mobile, maybe that's one idea. For now, we are looking to making mobile profitable, stand-alone mobile profitable. So, including ads, it's based on EBITDA. But within this year, yes, we would like to achieve this business to be positive. And the synergy with financial service, arm, why with Rakuten Mobile, why do people buy more than 60% at Rakuten Ichiba. But I guess one thing is brain shower increases and with points, you'll be able to pay the subscription fee. Or more than that, by becoming a subscriber, you become conscious that you are a Rakuten member. So Point Magic and Rakuten Magic perhaps is working even more strongly. So, now connectivity into financial service with points they are already connected, but how to go about utilizing data, so that's one thing. So, if we think about synergy with finance arm, well there are different banks. And basically, the service needs to be robust. That's important. And if you come to Rakuten and if you do everything at Rakuten, using Rakuten Bank and carry the card and sign up for Rakuten Insurance and also have account at Rakuten Securities, then perhaps you'll be able to pay for all the communication fee. So, where to lay arbitrage that's one thing. And RCA strategy in the world I think Rakuten is the only player with successful strategy. So, about the quality, yes, we've gone through this so many times. And another major thing is for iPhone users they cannot receive the call or even if they want to make another call, they were not able to see in the history. But now we are improving. We are going to make SMS open. And we're negotiating that for voice we can make it open. Then we will be able to go after iPhone users as well. So, the concept of communication this has to be changed. And also the cash point the sending money, the transfers and being able to pay Dutch and also ¥30 million for Rakuten Bank from ¥15 million to ¥30 million. So, various communication and money transfers, money payment, combining these services -- and the key -- one of the keys is this app called Link.
Yoshitaka Nagao: Okay. I've understood very well. Thank you very much.
Operator: Thank you. That concludes the Q&A session for the analysts and also the investors. Thank you very much. So, Mikitani-san will be concluding the session.
Hiroshi Mikitani: Well, once again thank you very much for joining us. Quite long hours with us now. And for one thing I would like to make the promise that Rakuten Mobile and Rakuten Group, the significant operational optimization I believe that we were able to make this promise. At the same time, in terms of investment costs for mobile, we have been able to reduce extensively at the same time, the roaming had been utilized effectively as well. So, network improvement had also been realized and we need to, of course, work a bit harder of course, but that's where we are. And in the meantime, a very meticulous analytics and action list. We were able to create this and compile this. And in terms of financial risks is close to being zero as of now. So, this is our belief. And in the future that based on this foundation, a sound growth has to be achieved and this is what we are trying to pursue. So, not a surficial GMS or superficial revenue, meaningful robust business have to be pursued in the future. As for Rakuten Group, we will need to evolve and we are in the process of evolving. So, I hope that we'd like to seek your feedback your insight and we'd like to make further improvement. So, thank you very much.
Operator: Thank you very much. So, that concludes Rakuten Group 2023 full year and the fourth quarter result meeting.
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