KDDI Corp. (TSE:9433, Financial) (4.1%) (9433 JP – $22.23/¥2663.38 – Tokyo Stock Exchange), formed in 2000, is Japan’s second largest wireless operator, marketing its mobile services under the umbrella ‘au’ brand and now serving over 44 million subscribers. It also has substantial fixed broadband and CATV operations. KDDI serves 3.5 million fiber-to-the-home (FTTH) connections and is the largest cable operator in Japan, with over 5 million CATV subscriptions and market share in multichannel services exceeding 50%. In fiscal year ended March 31, 2015, a rise in the smartphone penetration rate led to robust increases in data ARPU and overall rise in au ARPU of 0.7% year-over-year. As of March 2015, KDDI’s smartphone penetration was 54%. Going forward, the company expects this rate to rise to more than 70%, commensurate with levels in the United States and South Korea. KDDI is putting in place the pillars for sustainable new growth by further developing its “3M” and “Global” strategies. “3M” refers to Multi-network, Multi-device, and Multi-use. As part of the 3M Strategy, in May 2014, KDDI launched “au WALLET”, a new platform service aimed at boosting value-added revenues through offline services. “au WALLET” acts as a prepaid e-money service with settlement function for use at physical shops. A tie-up with MasterCard means that it can be used at roughly 38 million stores worldwide. The transaction volume for conventional billing service (“au Simple Payment”) and the new “au WALLET” service amounted to ¥380 billion in fiscal year ended March 31, 2015 and is expected to rise to approximately ¥850 billion the following year. As part of its “Global” strategy, in June 2014, KDDI formed a joint venture (KGSM) with Sumitomo Corporation that entered Myanmar’s telecom market. KGSM and Myanma Posts & Telecommunications (MPT) are jointly providing telecom services in the country with significant growth opportunities (Myanmar’s mobile penetration stood at only 10% at the end of 2013).
From GAMCO's Global Telecommunications Fund third quarter 2015 shareholder commentary.
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