SKY Perfect JSAT Holdings Inc.

Competition in the satellite communications business is intensifying due to the emergence of new entrants, including the full-scale launch of communications services by low-Earth-orbit satellite constellations. The Group is responding through long-term contract proposals, participation in government-related projects, expansion in the global mobile field, and development of new services utilizing HAPS and optical communication technologies. However, there remains a risk that the Group may be unable to maintain competitiveness amid rapid changes in the market environment.

Delays in satellite manufacturing, launch delays or failures, supply chain issues, and geopolitical factors may delay the commencement of operations of successor satellites, resulting in revenue decline or customer attrition. The Group has implemented measures such as adopting a milestone payment structure, placing advance orders for backup and substitute satellites, and entering into launch risk insurance. However, damage may remain uncompensated if insurance does not cover the full extent of losses or if losses fall under absolute exclusions such as war risk.

Communications satellites with an operational life of 15 years or more may experience malfunction or degraded operational capability due to manufacturing defects, magnetic storms, debris collisions, excessive fuel consumption, and other factors. Due to delays in the commencement of service by successor satellites, the plan has been changed to repurpose dedicated backup spare satellites as successor units, increasing the risk that full substitute functionality cannot be provided in the event of a malfunction in a satellite currently in operation. The Group has entered into in-orbit risk insurance, but this does not cover business interruption losses or third-party liability.

Due to the penetration of video streaming services and changes in viewing habits, there is a risk that the number of subscriptions to SKY PerfecTV! (2,454 thousand as of the end of March 2026) may fall below plan. The Annual Securities Report explicitly states that the risk level has increased compared to previously due to the rise of video streaming services. The Group is responding by focusing on key genres such as professional baseball, motorsports, and Korean dramas, as well as cost reductions, but there remains a risk that subscriber declines due to intensifying competition may exceed expectations.

In acquisitions, investments, and alliances, failure of integration, failure to achieve expected synergies, difficulty in applying internal controls, and the emergence of unforeseen problems may adversely affect the Group's financial position and operating results. Where significant goodwill or intangible assets have been recognized, there is also a risk of impairment arising from declining profitability of the target business. The Group has established investment regulations, a multi-layered check system involving the Management Committee and Board of Directors, and milestone reviews, but it is not possible to completely prevent losses arising from changes in market and competitive conditions.

If technical information related to the Space Business or subscriber information (personal information) related to the Media Business is leaked due to unauthorized access, system failure, human error, or other causes, this could result in a decline in social credibility and incur damages costs. A large-scale cyberattack could also lead to suspension of broadcasting/distribution services and satellite communications services. The Group has implemented measures such as obtaining ISMS certification and the Privacy Mark, establishing a CSIRT, appointing a CISO, and deploying intrusion prevention systems, but there remains a possibility that sophisticated cyberattacks could result in information leakage or service disruption.

In the Frontier Domain (HAPS, Optical Communications, Quantum Key Distribution, etc.), delays in technological development, deterioration in the financial condition of business partners, or changes in the market environment may cause outcomes to differ from initial plans, potentially affecting business and financial performance indicators. The Group conducts thorough prior research and analysis, exercises greater caution in selecting business partners, and follows necessary decision-making processes after formulating business plans, but the inherent uncertainties of new businesses cannot be eliminated.

The Group aims to strengthen its satellite imagery sales services through the construction and ownership of low-Earth-orbit satellite constellations and business alliances with earth observation satellite operators, but revenue growth may not proceed as planned due to the emergence of competitors and changes in the market environment. There is a risk that intensifying price competition in satellite imagery, driven by an increase in new entrants, could adversely affect the Group's profitability.

Fluctuations in the space insurance market environment may lead to rising premiums for launch risk insurance and in-orbit risk insurance. Rising premiums directly increase costs, and since losses falling under absolute exclusions such as war risk are not covered by insurance, the Group may be required to bear the full cost of damages itself in the event of satellite damage. The Group responds by periodically reviewing coverage scope and amounts, but there remains a risk that sufficient coverage cannot be secured depending on market conditions.

If a compliance-related issue arises at an investee company, this could damage the Group's social credibility. The Group dispatches personnel to investee companies, requires compliance with regulations, and conducts periodic reviews of financial condition, profitability, and the rationale for holding the investment. However, it is difficult to fully control the management of investee companies, and there remains a risk of reputational damage or losses to the Group should problems arise.