Japan Communications Inc.

The core of the Company's services depends on the procurement of mobile communication networks and related resources from NTT DOCOMO and SoftBank. If contract termination or deterioration of terms were to occur, continued provision of the Company's services would become impossible. There is also a risk that if mobile network operators strengthen their own services without reflecting improvements in the terms offered to the Company, the competitiveness of the Company's services could be lost. The Company is working to secure stable procurement by utilizing the interconnection system under the Telecommunications Business Act, and has reached an agreement in February 2024 regarding interconnection with DOCOMO's voice and SMS networks, with preparations currently underway.

Mobile network operators, MVNOs, and system integrators (SIs) are each strengthening services that compete with the Company's offerings, backed by their strong capital resources, customer bases, and technological capabilities, raising the risk of intensifying price competition and outflow of existing customers. Since mobile network operators are also the Company's suppliers of mobile communication networks and related resources, intensifying competition carries a dual risk of also spilling over into worsening procurement terms. The Company aims to reduce competitive risk by promoting collaborative strategies with partner companies, including SIs.

The Company's services may be suspended or degraded due to failures in mobile network operators' mobile communication networks and related resources, access congestion, unauthorized external intrusion, natural disasters, power outages, or other causes. Bugs or overload-related malfunctions in the Company Group's own network equipment and computer systems pose similar risks. The Company addresses these risks by establishing data centers at multiple sites in eastern and western Japan, maintaining round-the-clock monitoring systems, and positioning the Yoshioka Operation Center in Yoshioka-machi, Gunma Prefecture as its second head office under its BCP.

If technical standards such as 4G/5G, wireless LAN, TCP/IP, and RADIUS authentication change rapidly, significant technology development costs may be incurred to respond, which could put pressure on earnings. Delays in responding to changes in technical standards or the obsolescence of existing technology would directly lead to a loss of competitiveness in the Company's services. The Company Group addresses this through continuous investment in technology development and maintaining and enhancing its marketing capabilities.

The Company issued unsecured bonds of ¥2,000 million in March 2025 and ¥4,000 million in March 2026 to fund capital expenditures aimed at realizing interconnection with DOCOMO's voice and SMS networks; however, there is no guarantee that funding under similarly favorable terms will be available if funding needs exceed expectations. If additional fundraising becomes necessary due to a decline in profitability, the Company may be forced to raise funds under unfavorable terms. As of the end of the current consolidated fiscal year, the Company held cash and deposits of ¥7,107 million, securing working capital and capital expenditure funds for the immediate future.

The Company Group acquires and manages customers' personal information, including names, addresses, dates of birth, and telephone numbers, in the course of its telecommunications business and specified certification business, among others. If such information were to be leaked, it could result in loss of customer trust and claims for damages. Although the Company has implemented measures such as access authority management and the collection of confidentiality agreements, there is no guarantee that leakage can be completely prevented. As a business operator subject to obligations under the Act on the Protection of Personal Information, the Company is required to continuously strengthen its management systems.

Communication devices are procured from multiple companies, but semiconductor supply shortages caused by circumstances in the Middle East and other regions, as well as the spread of infectious diseases, may lead to shortages and price increases, resulting in rising business costs and lost business opportunities due to an inability to supply customers in a timely manner. Minimum order quantity constraints may also force excessive ordering, creating a concurrent risk of inventory obsolescence. The Company Group strives to improve the accuracy of demand forecasting through close communication with communication device manufacturers.

The Company Group's business is subject to regulation under various laws, including the Telecommunications Business Act and the Act on Electronic Signatures and Certification Business, and tightening of regulations could restrict business activities or increase costs. Conversely, there is also a risk that deregulation could lead to an increase in new entrants and intensifying competition. The certification for the specified certification business held by my FinTech Co., Ltd. under the Act on Electronic Signatures and Certification Business requires renewal at regular intervals, and expiration or revocation would lead to reputational damage and loss of business opportunities.

Securing necessary personnel has become difficult against the backdrop of a declining working-age population due to the low birthrate and aging population. In particular, in new business areas, dependence on the experience and skills of a small number of individuals is high, creating a risk that the departure of key personnel could directly and adversely affect the business. Recruiting and developing appropriate personnel and establishing suitable working conditions is not easy, and there is a risk that securing the personnel necessary for business expansion could be delayed. The Company Group strives to secure, develop, and retain personnel through a promotion system based on ability and aptitude and diverse recruitment policies.

Natural disasters such as a major earthquake directly beneath the Tokyo metropolitan area or an eruption of Mt. Fuji, or a resurgence of infectious diseases, could make it difficult to continue business operations at the head office (Minato-ku, Tokyo) and the Yoshioka Operation Center (Gunma Prefecture), and if officers or employees suffer personal harm, there is a risk of long-term business suspension. Sales of prepaid products for inbound travelers to Japan could also decline significantly due to the spread of infectious diseases, deterioration of the international situation, sudden exchange rate fluctuations, and other factors. As part of its BCP, the Company is proceeding with the establishment of a multi-site system, but there is also a risk that a shortage of personnel and resources could delay the development of this system as planned.