SoftBank Corp.

In the management of customer information and confidential information, there is a risk that information leakage may occur due to intentional acts or negligence by officers and employees, or due to cyber attacks or unauthorized access by third parties. Following the unauthorized access incident at LINE Yahoo Corporation in 2023, a system failure caused by a ransomware attack occurred at consolidated subsidiary ASKUL Corporation, and measures to prevent recurrence are being promoted. If information leakage occurs, it may lead to a decline in trust and corporate image, and significant burdens from damages compensation and remediation costs, which could affect the Group's business, financial condition and results of operations.

There is a risk that services may be interrupted or quality may deteriorate in communication networks and information systems due to human error, equipment failure, cyber attacks, and other causes. The risk of large-scale natural disasters is also increasing due to the rising probability of occurrence of the Nankai Trough earthquake and a earthquake directly beneath the Tokyo metropolitan area, as well as climate change. Although network redundancy and emergency restoration systems have been established, if a widespread and prolonged failure occurs, it will become difficult to retain and acquire customers. Significant costs for restoration and repair may be incurred, which could affect the Group's business, financial condition and results of operations.

The Group is subject to a wide range of laws and regulations covering telecommunications, finance, digital platforms, AI, and other areas, and there is a risk that the introduction or revision of new regulations may restrict the products, services, and pricing plans that can be offered. Following its designation as a Specified Critical Infrastructure Operator (November 2023) under the Economic Security Promotion Act, the Group is required to respond to government reviews, and insufficient response may result in administrative measures such as corrective or suspension orders. If a violation occurs, administrative sanctions, termination of business contracts, and loss of trust may result, which could affect the Group's business, financial condition and results of operations.

In the telecommunications, internet, and cashless payment markets, there is a risk that if competitors, emerging companies, or new entrants gain an advantage through price competition or new services, it will become difficult to retain and acquire customers, leading to a decline in ARPU. In Japan, population decline and the falling birthrate and aging population are progressing, and there are uncertain factors regarding the continued expansion of the domestic market. Increased expenses for developing new products and services and sales promotion to maintain competitiveness may pressure profitability, which could affect the Group's business, financial condition and results of operations.

Technological innovation, including generative AI and AI agents, is progressing rapidly, having a significant impact on existing business models. The Group is taking measures such as researching the latest technology trends, conducting proof-of-concept experiments, and forming alliances with other companies, but there is no guarantee that responses to new technologies will proceed on the expected timeline or with the expected effectiveness, and the Group may be unable to create services, technologies, and business models suited to market changes. If the response is delayed, loss of service competitiveness, suppressed subscriber numbers, and declining ARPU may result, which could affect the Group's business, financial condition and results of operations.

There is a risk that conflicts between nations, regional conflicts, and tariff policies of the US Trump administration and others may cause delays in the procurement of semiconductors and other components, cost increases, and supply chain disruption. Continued increases in electricity prices are also a concern, and it is estimated that a 1 yen increase per kWh would have an annual impact of approximately ¥2,300 million. Although measures such as diversifying and varying suppliers and foreign exchange forward contracts are being implemented, if supply chain disruption occurs, it may hinder the stable supply of products and services, which could affect the Group's business, financial condition and results of operations.

The Group raises funds through bank borrowings, corporate bond issuance, receivables securitization, and other means, and there is a risk that fundraising costs may increase due to rising interest rates or a decline in creditworthiness. Approximately 90% of long-term interest-bearing debt is raised at fixed rates to mitigate short-term impact, but bank loans are subject to financial covenants, and if these covenants are breached, the Group may lose the benefit of the grace period and be required to repay part or all of the borrowings. If the Group is unable to raise funds as planned due to deterioration in financial market conditions, it could affect the Group's business, financial condition and results of operations.

In acquisitions of other companies, establishment of joint ventures, and intra-group organizational restructuring, there is a risk that results and financial condition may be affected if the acquired entity fails to achieve the expected performance, if corporate value is overestimated, or if the internal management system fails to be established after integration. The Group does not necessarily hold control over its business alliance or joint venture partners, and expected results may not be achieved due to major changes in business strategy or a decline in the shareholding ratio. Increased borrowings for acquisition funds or the discovery of unrecorded liabilities may increase the debt burden and worsen cash flow.

The parent company, SoftBank Group Corp., effectively holds 40.1% of the Company's voting rights and has significant influence, including veto power over special resolution matters at shareholders' meetings. Although governance has been strengthened through a structure in which outside directors make up a majority of the Board of Directors and through the establishment of a voluntary nomination and compensation committee, if the relationship with the parent company deteriorates, or is perceived to have deteriorated, it could affect the Group's business, financial condition and results of operations. There is also a possibility that competition for future investment opportunities may arise with subsidiaries of SoftBank Group Corp.

As the Group operates a telecommunications business that consumes a large amount of electricity, there is a risk that the increasing severity of natural disasters due to progressing climate change, and the introduction or strengthening of new laws and regulations aimed at decarbonization, may increase the cost burden related to communication network and information system facilities. The Group has set a carbon neutrality target by FY2030 (ending March 2030) and a target of net-zero supply chain emissions by FY2050 (ending March 2050), and is promoting disclosure in line with the TCFD framework, but additional costs will be incurred if these measures are not effective. Continued increases in electricity prices directly push up energy procurement costs, which could affect the Group's business, financial condition and results of operations.