Asahi Net, Inc.

As of the end of December 2025, the number of FTTH subscriptions reached 41.51 million, and as the market matures, the growth rate of the Company's internet subscriber base may decline over time. If subscriber acquisition does not proceed as planned, this could lead to a slowdown in revenue growth. The Company is working to increase revenue per member by expanding internet-related services beyond the connectivity business, but commercializing such services requires a corresponding amount of time and expense.

The Company's main competitors are telecommunications carriers, including major communications carriers, which have significantly greater capital resources, technological capabilities, sales capabilities, customer bases, and brand recognition compared to the Company. Changes in competitors' business policies or pricing may further intensify competition, potentially affecting the Company's business and financial condition. While the Company seeks to differentiate itself through the expansion of proprietary services, the disparity in management resources remains a structural risk.

In FY2026 (ending March 2026), internet connectivity services accounted for a high proportion of total revenue at 90.3%, indicating a high degree of dependence on a specific service. When acquiring new members, costs such as line usage fees arise ahead of revenue recognition due to initial fee waivers and monthly usage fee-free campaigns, temporarily worsening profitability. In addition, geopolitical risks, rising energy prices and raw material costs associated with yen depreciation, and increases in outsourcing costs and wage levels are also factors that put pressure on revenue.

Backbone line costs are significantly affected by traffic generated through internet usage, and communication line usage fees may increase substantially due to growth in FTTH subscriptions or large-volume traffic consumption caused by viruses, spam emails, video streaming, and similar factors. Unexpected increases in traffic could have a direct adverse impact on the Company's revenue. The Company continuously implements measures such as network capacity expansion, but the risk of increased costs cannot be entirely eliminated.

Internet connectivity services and related services are subject to rapid technological innovation, and any delay in responding to such changes could hinder the development and introduction of new services, disrupting the acquisition and retention of new members and reducing competitiveness. There is also a risk that assets resulting from capital investment could become obsolete due to technological innovation, causing a significant decline in their usage value or asset value. Continuous technology investment and human resource development are essential, but these also entail an increasing investment burden.

The Company operates network equipment and servers under a 24-hour, 365-day management system, but service interruptions or outages may occur due to system failures or line failures at telecommunications carriers. Natural disasters such as earthquakes, fires, and floods, as well as information security breaches such as cyberterrorism and virus intrusions, can also cause service outages. If such events occur, they could damage the Company's reputation and adversely affect its business and financial condition.

The Company has entered into agreements for the provision of access lines with NTT East, NTT West, KDDI, UQ Communications, and NTT Docomo Business, and provides services based on these agreements. If any of these agreements are terminated or their terms are changed, the Company may need to revise its business strategy and pricing policy, which could affect its business and financial condition. The structure of relying on external operators for key communications infrastructure inherently carries risks beyond the Company's control.

The Company holds personal information for a large number of members and is subject to regulation under the Act on the Protection of Personal Information. Should personal information be leaked externally, the Company would incur substantial costs for remedial measures, and could also face claims for damages or reputational damage. The Company strives for appropriate operations based on its personal information protection policy, but the risk cannot be entirely eliminated.

Internet-related laws and regulations, including the Telecommunications Business Act, the Unauthorized Computer Access Law, the Act on the Provider Liability Limitation and Information Distribution Platform (the Information Distribution Platform Countermeasures Act), and the Act on Specified Commercial Transactions, are being developed and strengthened, which could lead to increased compliance costs and reduced flexibility in business operations. In particular, an increase in the number of requests for disclosure of sender information under the Information Distribution Platform Countermeasures Act could lead to a higher cost burden. Inadequate responses to such regulations could result in reputational damage and adversely affect business performance.

Stable growth for the Company requires the continuous securing of highly skilled technical personnel as well as talented, versatile human resources across various departments. At present, the Company secures personnel through new graduate and mid-career hiring and is proceeding smoothly with their development; however, if the Company is unable to sufficiently recruit and develop the necessary personnel, this could have a material impact on future business development. Intensifying competition in the labor market and rising wage levels are also factors that increase the difficulty of recruitment and retention.