U-NEXT HOLDINGS Co.,Ltd.

In addition to a shrinking core viewer base due to Japan's declining and aging population, intensifying competition from new entrants including foreign capital with massive financial resources poses risks of rising content procurement and production costs and a decline in subscribers. If the appeal of content falls behind that of competitors, this could directly impact business performance. As a countermeasure, the company continues to expand content across video, music, sports, books, etc., and pursue differentiation through analysis of customer preferences.

Among business establishment customers, who are the primary clients of the Store & Facility Solutions Business, difficulty passing on rising raw material, fuel, and labor costs, severe labor shortages, and prolonged business suspensions due to the spread of infectious diseases could lead to an increase in business closures, which may affect the Group's business performance. The company strives to retain existing customers and acquire new ones through the development of services addressing demand for contactless operations, labor-saving, and cashless payments, as well as by expanding sales channels through the use of agents.

In the Store & Facility Solutions Business, if the company fails to accurately predict future technological innovation and market needs, and improvements or development of the products and services offered are not carried out in a timely and appropriate manner, obsolescence could reduce market competitiveness and affect business performance. This business is a core business of the Group, and maintaining a stable revenue base is required. The company monitors trends in new technologies such as AI and works on developing new products and services and creating new business models by strengthening its ability to grasp customer needs and make proposals.

Procurement of products and parts in the Store & Facility Solutions Business depends on multiple suppliers, and political and economic turmoil, the spread of infectious diseases, international conflicts, terrorism, and global changes in supply-demand structures affect the entire supply chain. If the necessary quantities cannot be secured continuously and stably at appropriate prices, this could affect business performance. Currently, the company diversifies procurement through multiple suppliers, but complete elimination of this risk is difficult.

In the telecommunications field, intensifying price competition due to an increase in new entrants into MVNO services, and in the energy field, instability in electricity procurement prices caused by international conflicts and intensifying competition for customer acquisition with rival operators, are proceeding simultaneously. A decline in competitiveness could lead to reduced sales and an increase in advertising and sales promotion expenses beyond plan, and delays in adopting renewable energy could result in customer attrition, potentially affecting business performance. The company aims to strengthen competitiveness by providing one-stop services leveraging the Group's customer assets and differentiating through the introduction of renewable energy.

In the Store & Facility Solutions Business and the Telecommunications & Energy Business, if agents entrusted with acquiring contracts engage in improper activities resulting in customer disputes or illegal acts, there is a risk that the social trust and credibility of the Group, as the entrusting party, could be undermined. Given the business structure's reliance on sales expansion through agents, the impact of inadequate management could be extensive. The company continues to provide necessary guidance and supervision to its affiliated agents.

The Group is subject to a wide range of legal regulations, including the Broadcast Act, the Copyright Act, the Telecommunications Business Act, the Building Lots and Buildings Transaction Business Act, and the Act on Control and Improvement of Amusement Business, among others, and unforeseen circumstances leading to regulatory violations or administrative sanctions could affect its business and performance. There is also a risk that unpredictable changes to or establishment of new laws and regulations could have a significant impact. The Group Management Supervision Division takes preventive measures in cooperation with operating companies under the advice of attorneys, and in March 2025 established a Compliance Promotion Office to promote awareness across the Group.

It is stated that information leakage, data destruction or tampering, or service outages caused by cyberattacks, human error, or system vulnerabilities could have a material impact on the business and performance. In the event of personal information leakage, there are also risks of reputational damage, claims for damages, incurrence of response costs, and service suspension. The company has established a Group-wide security organization, "Usirt," and takes countermeasures through planned implementation of external audits and regular e-learning training for employees.

Rising market interest rates due to changes in domestic and international economic conditions or shifts in monetary policy could increase the burden of interest payments on borrowings and raise the cost of new fundraising, potentially affecting financial position and business results. Foreign exchange fluctuation risk associated with foreign-currency-denominated transactions with overseas business partners could also affect performance. Additionally, there is a possibility of further impairment losses due to fluctuations in the market prices of fixed assets. The company strives to mitigate interest rate fluctuation risk through diversification of funding methods, appropriate management of the fixed interest rate ratio, and strengthening of its financial position.

If the securing and development of personnel essential to the continued growth of the business does not proceed as planned, or if unexpected attrition of core personnel occurs, this could lead to a decline in competitiveness and have a material impact on business performance. Demand for specialized personnel supporting the Group's diversified business operations is high, and intensifying competition in the labor market poses a risk of hiring difficulties. The company is implementing measures such as expanding recruitment channels, strengthening recruitment branding, promoting workstyle reform through "Work Style Innovation," and raising compensation levels for younger employees.