BroadBand Tower, Inc.

An actual cyberattack occurred in December 2025, and if a system outage or information leak were to occur, it could have a material impact on social credibility and business performance. The Company strives to minimize risk through the establishment of a management system based on the zero trust concept and the introduction of advanced detection tools, but there is no guarantee that all attacks can be completely defended against.

While the data center market is expected to grow due to IoT and AI demand, a severe competitive environment continues due to intensifying price competition and diversifying customer needs. At the Otemachi No. 1 Site, which has been in operation for over 20 years since opening, a decline in profit associated with declining revenue is expected, and if service price reductions or contract revisions occur due to the influence of competitors, business performance may be affected. The Company is seeking differentiation through the New Otemachi Site and new services, but there are uncertainties in securing a competitive advantage.

A large proportion of the Group's revenue comes from services provided to specific customers, giving rise to customer concentration risk. If a customer changes its business strategy, revises its investment plans, or switches orders to a competitor, it could have a material impact on the Group's business performance. The Company strives to maintain and develop favorable business relationships, but it faces a structural risk that depends on the customer's own decision-making.

Data centers are facilities that consume large amounts of electricity, and further increases in electricity rates due to rising energy prices amid recent international circumstances could impede business dealings with customers. In addition, if environmental regulations related to global warming are imposed on data center operators, business and performance could also be affected. The Company is proceeding with power-saving measures, but it is difficult to completely eliminate the risk of cost increases due to external factors.

The Company has entered into a committed syndicated loan agreement with five financial institutions, including its main banks, for investment in the new data center, which includes a net assets maintenance covenant (maintaining at least 80% of net assets at the end of the most recent fiscal year) and an ordinary income/loss covenant (prohibiting losses for two consecutive periods). If these financial covenants are breached, the Company could lose the benefit of the grace period, which could have a material impact on cash flow. As of the end of the consolidated fiscal year under review, no breach of these covenants has occurred.

If the profitability of the Group's businesses declines due to a deterioration in the management environment or other factors, making recovery of invested amounts in fixed assets and investment securities held by the Group unlikely, impairment losses or valuation losses may arise, affecting business performance. The fund business similarly entails the risk of exit difficulties due to deteriorating performance of investees or insufficient liquidity. The risk of accounting-related impairment associated with new investments could also materialize during phases of business expansion.

The Company does not own its own real estate for data centers, but primarily operates a model in which it installs equipment on real estate owned by other companies to provide services. If the real estate owner refuses to continue the lease in whole or in part, or requests changes to the contract terms, it could have a material impact on business continuity and performance. This risk relates to the fundamental basis of the business and involves a structural vulnerability due to the difficulty of securing alternative sites.

The revenue of consolidated subsidiary Japan Cablecast Co., Ltd. depends on the cable television-related market, and there is a risk that the number of households subscribing to paid multi-channel broadcasting will decline due to competition from video streaming services, changing viewer preferences, population decline, and other factors. Significant investment and expenses have been incurred to support new 4K8K satellite broadcasting and ACAS-compatible advanced cable self-broadcasting services, and if expected revenue cannot be recorded, business performance could be affected. If a cable television operator were to discontinue providing services, this could also affect business performance and financial condition.

If a system failure occurs due to a cyberattack, system or hardware malfunction, a large-scale power outage by an electric power company, a natural disaster such as an earthquake, typhoon, or flood exceeding anticipated scale, or an unpredictable event such as war, terrorism, or an accident, business performance may be affected. The Company has implemented business continuity measures such as earthquake-resistant and seismic isolation structures, gas fire extinguishing equipment, emergency backup generators, and redundant network configurations, but there are limits to complete preparedness for events exceeding expectations.

The Company's current largest shareholder is Internet Research Institute, Inc., and while the Company plans to continue its favorable cooperative relationship with that company, if there is a change in its management policy or a change in the largest shareholder, it could affect the business operations of the Group. This is a structural risk in which the intentions of the controlling shareholder could influence business strategy and management decisions, and attention must also be paid to this from the perspective of protecting the interests of minority shareholders.