Competition Policy &

KDDI - Business Strategy

November 24, 2009

Ubiquitous Solution Company

KDDI Corporation

Vice PresidentCorporate Communications Division

Takeshi Nagao

1

Fixed Line Business

Mobile Business

Corporate profile

2

Corporate Name ：KDDI CORPORATION

Date of Establishment : June 1, 1984

KDDI was established upon a three-company merger

(DDI(Long distance), KDD(International), IDO(Mobile))

in October 2000.

Capital : 141,851 million

No. of Employees : 16,970 (consolidated basis)

Major shareholders :

Kyocera Corporation 12.85%

Toyota Motor Corporation 11.16%

The Tokyo Electric Power Company. Incorporated 8.02%

Company Profile

Note 1: As of end-Mar. 2009.

Note 2: Share of major shareholders is based upon the number of shares issued and outstanding used as a denominator.

3

ＫＤＤＩ Revenues

■After the merger in 2000, mobile business has been the main driver of KDDI revenues. The revenue from mobile

business occupied almost 80% of total revenues in FY2008.

■After FY2005 KDDI revenues exceeded trillion yen, and KDDI is aiming for synergy effect by offering converged

services with fixed-line business.

0

1,000,000

2,000,000

3,000,000

4,000,000

1990年度 1995年度 2000年度 2001年度 2002年度 2003年度 2004年度 2005年度 2006年度 2007年度 2008年度

（Unit：million yen）

2,268,646

2,833,799 2,785,343 2,846,098

3,335,259

3,596,2843,497,509

2,920,0393,060,814

77%

20%

3%

73%

23%

4%

76%

22%

2%

80%

19%

1%

81%

17%

2%

81%

17%

2%

80%

18%

2%

79%

18%

3%

77%

22%

1%

432,330

1,144,319

Mobile Business

Fixed-line Business

Other Business

Before Merger

DDI

KDD

IDO

1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 (FY)

4

Fixed Line Business

Mobile Business

Corporate profile

5

Introduction of Competition into Long Distance Telephone Market

■In 1987, ＤＤＩ, Japan Telecom and TWJ （New Common Carriers; NCC）entered into long distance telephone market.

■With the progress of creating an environment for fair competition, competition had been promoted through the

diversification of services and the reduction of rate. The number of DDI’s domestic telephone subscribers increased

to 15 times in 10 years.

⇒ ･ Call rate between Tokyo and Osaka declined from \400/3min.(1988) to \80/3min.(2001).

⇒ ・ NCC’s share of inter-prefectural calls reached around 50% in 2001.

220

360

540

650

1,250

1,4401,500

1,6301,682

110

1,350

880

400

360

330

280

180

300280

230

400

240

200 200 200

140

110

300

200180 180 180

170

130

100

300

0

500

1,000

1,500

2,000

1 2 3 4 5 6 7 8 9 10 11 12

0

100

200

300

400

500（Thousands of sub.） Number of DDI’s domestic telephone subscribers

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998（FY） ・・・・・・・2001

・・・・・・・

（yen）

\80

ＮＴＴ’s rate

declined in

the same

amount as

ＮＣＣ’s

July：Discount

plan launched

April： Introduction

of interconnection

rates with ＮＴＴ

Sept：LD

telephone

service

launched

ＮＴＴ’s rate（yen）

ＮＣＣ’s rate（yen）

20,000

15,000

10,000

5,000

6

Enhancement of KDDI’s fixed-line services

Evolution

1995 1996 1997 1998 1999

Virtual Private Network (VPN)

May 95～

Dedicated line access

Jun 96～

ISDN digital communications

ModeApr 97～

Internet connectionJul 97～

ＡＴＭdedicated line

Jun 98～

Cell relayDec 98～

IP-VPNOct 00～

Toll-free callJul 99～

Voice

Data

Frame relayApr 95～

Direct access telephoneFeb 05～

Ethernet

dedicated line

Apr 01～

Ether-VPNDec 01～

2000 2001 2002 2003 2004 2005

FTTH connectionOct 03～

ADSL connection(512k)

Apr 00～

Optical dedicated Line accessOct 04～

ADSL connection（1.5M）Apr 01～

ADSL connection（8M）Dec 01～

ADSL connection（12M)

Oct 02～

IP TelephonyApr 03～

FTTH

connection

(for detached house)Jun 05～

Inte

rnet

Intra

net

Internet connection

(dial-up)Nov 97～

7

Expansion of Competition into Fixed Access Line Market

00

41

91

00

1,799

167

00

2,813

592

667

286

3,279

710

722

604

3,130

1,099

0

1000

2000

3000

4000

5000

6000

1 2 3 4 5

ＦＴＴＨ

メタルプラス

ケーブルプラス電話

ケーブルテレビ

October 2003Launched HIKARI-one (formerly Hikari-plus)

February 2005Launched Metal-plus

October 2005Launched Cable-plus phone

January 2006Absorbed POWEREDCOM (TEPCO subsidiary)

January 2007Integrated TEPCO’s FTTH business

June 2007Consolidated JCN Group (CATV) as subsidiaries

April 2008Consolidated CTC as subsidiary(CTC: Chubu Electric’s subsidiary)

■With the review of calculating method for dry copper interconnection rates, KDDI launched “Metal-plus”, a direct-access, fixed-line telephone

service leasing NTT’s copper lines in 2005. Furthermore, it started to provide “Cable-plus phone” with CATV companies in the same year,

and expanded its direct-line telephone subscribers.

■In response to unbundling of NTT’s optical fiber, KDDI entered into FTTH market leasing NTT’s dark fiber in 2003. It integrated FTTH

business of Tokyo Electric Power Co.(TEPCO) in 2007, and consolidated CTC(Chubu Electric’s subsidiary) as subsidiary in 2008.

■KDDI’s business originated in transit telephone service, and it has been working on new access line businesses such as FTTH, direct line

telephone (Metal-plus, Cable-plus telephone) and CATV. The number of its fixed access line subscribers reached 5.34 million at the end of

FY 2008.

2004 2005 2006 2007 2008（FY）

（4,827） （5,342）

Metal-plus

Cable-plus phone

CATV

Note1: ( ) shows total subs of access lines excluding crossover subs.

（Thousands of sub.）

8

Development of Fixed Broadband Services

■Screen image

IP phone service/Broadband Internet FTTH / Triple play

Telephone

■Lower monthly and usage fees

■Telephone terminal and number

unchanged

■High-Speed and stability

compared with ADSL

Internet Connection

■ Multi-channel

broadcasting, VOD etc.

Television■ High speed internet - access

■ ADSL (50Mbps or 10Mbps）

■Lower monthly and usage fees

■Telephone terminal

& Number unchanged

■KDDI provides FTTH service named “HIKARI-one” which offers the triple-play services of voice telephony, Internet and video.

■”au Collective Talk”, the first full-scale FMC (Fixed Mobile Convergence) service, enables subscribers to place free domestic calls to au

mobile phones and au home phones such as IP telephony from their au home phones 24 hours a day.

Cable-plus phone*

CTC FTTH phone *

* Allows CATV operators and CTC to provide fixed-line telephony services using their coaxial cable network, optic fibers and KDDI’s backbone network.

Max １Ｇｂｐｓ

FTTH/Triple playIP phone

9

Fixed Line Business

Mobile Business

Corporate profile

10

Introduction of Competition into Mobile phone Market

■In 1988, KDDI (former IDO) entered into automobile phone market monopolized then by NTT as a first competitor.

･Competition to acquire subscribers among several operators has been effective from the start of the service.

■The number of subscribers rapidly increased due to the interactive effect of competition policy and technological

innovations.

･With technological innovations, “au” handsets have been equipped with advanced functions and services/price plans

have been diversified, thus users’ convenience has been improved.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

（Thousands of subscribers）

Dec：ＮＣＣ’s

entry

July：cdmaOne (2G)

service launched

Apr：Liberalization of sales

of mobile handsets,

PDC (2G) service lauched

Apr：3G（CDAM2000 1x）launched

Dec：Music download launched

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 （FY）

Nov：Mobile internet service

(ezweb) launched

Dec：Prior submission of tariffs

for user rates,

Subscription fee abolished

No. of “au”subscribers

No. of mobile internet （ezweb）users（included in left figures）

Nov： WIN

（1xEV-DO）lauched

11

Innovation and Service Deployment

Prices

Service

EZフラット

ａｕ Network Advancement and Service Diversification

00.November～

02 December～

03 November～

03 October～

03 November～

05 September～

04 August～ 05 May～

06 January～

06 April～

04 November～

02 October～

Student support Discount for Packet Switch

“Double Flat Light”“Double Flat”

Music Download

Navigation

Electronic Book

Full-Track Music Download

Electronic Payment

One-segment Broadcasting

Flat rate

Infrastructure

cdmaOne

2002 20031998 2006

CDMA2000 1x1xEV-DO

（Rev.0）1xEV-DO

Rev.A

Evolution

BCMCS

Max 144kbpsMax 2.4Mbps Max 3.1Mbps

Max 64kbps

LTE

2012

Max 100Mbps

12

（Weblog）

Auction “Osaifu-Keitai” (Electronic payment)

Bring more music

with mobile phones

search

■More enhanced contents including full-track music download, navigation and auction provided by

mobile phones

Mobile Broadband Services

Safe Navigation

Passenger-seat NavigationPedestrian Navigation

Chaku-uta Full ®

（Music Download）

（Electronic Book）

（Movie）

（Full-track Music Download）

13

Stronger Product -handsets-

PLY

PRISMOID

CA003 SH003 SH006

CA004 SH004 S001 SA001 T003 SH005

DATA01 DATA02E07K DATA03 DATA04

S002

Lineup for Autumn/Winter ’09 - Spring ’10: 20 models

K004

Note: 20 models exclude additional colors for S001 model. EXILIM and EXILIM Phone are trademarks of Casio Computer Co., Ltd. BRAVIA is a registered

trademark of Sony Corporation. Cyber-shot is a registered trademark of Sony Corporation. AQUOS SHOT is registered trademarks of Sharp Corporation.

12MP Camera Selection Video

8MP Camera Selection Slim/Compact Selection

Elder/Junior Corporate and Data （WiMAX hybrid cards）

■2H lineup includes meet-the-basic-needs models (slim/compact, waterproof, multi-color etc.) as well as 12MP/8MP

cameras and high quality video model.

14

Stronger Product -Content-

Ultra quick delivery to mobile

More than 200 news a day

Tailored to your preference

(Music)

LISMO! LISMO Video LISMO Book

“au Smart Sports” tops 1.5M members

“au Shopping Mall” tops 2M members.Newly launched “au one Brand Garden.”

Delivery to 100k+ members from broad user

base. WEB version started in September.

LISMO supported handsets surpass 20M.

Integrating entertainment brand of the

music/video and related E-books.

(Video) (E-books)

“EZ News EX”

E-commerce

■Improve customer satisfaction by strengthening entertainment content such as “LISMO” and “au Smart Sports,” as well

as news and other convenient services.

15

Network Evolution

Note: LTE: Long Term Evolution, OFDMA: Orthogonal Frequency Division Multiple AccessLTE achieves interworking with existing systems, realizing seamless handover to other systems, through the handset's dual-mode etc.

Data

Trans-

mission

Mobile

Phone

CDMA OFDMA

3G 3.5G 3.9G

Wi-Fi

CDMA2000 1x

2002 2004 2006 2008 2010s

W-CDMA

WiMAX (OFDMA : TDD)

HSDPA HSPA / HSPA+

LTE(OFDMA : FDD)

EV-DO Rev. 0 Rev. A Multicarrier Rev. A

LTE(OFDMA : FDD)

* CDMA: FDD

■LTE system roll-out is planned along with international trends of mobile broadband, expecting cost/bit reduction and

frequency usage improvement.

■Until the LTE roll-out, the aggregated operation of multiple EV-DO rev. A carriers is considered to upgrade the data

speed.

16

Service independent of various access networks

Infrastructure for providing FMBC service

Network Ultra 3G

Serviceapplication

Downloadline

Digital

broadcasting

New Wireless

system

W LAN

Others

2G cellular

WiredxDSL

Packet base

Core Network

Short-distance

communications

IMT-2000

Bluetooth , etc

Conversion with Broadcast

NGN： Next Generation Network

MMD： Multimedia Domain

NGN (Ultra 3G)

Fixed-

lineMobile

Broad-

cast

Fixed Mobile & Broadcast Convergence

■Under the “Ultra 3G” plan, construct KDDI NGN, leveraging Mobile system (MMD) to precede

competitors and establish differentiation.

17

・View the real time game in the bus via one-segmentbroadcasting.・3D image transferred to the glasses with Bluetooth.

Soccer match is recommended, check it now!

FTTH

KDDIFixed & Mobile Converged NetworkTerrestrial Digital

Broadcasting

Enjoy the next match at Stadium...... so buy its ticket on the Net. Done!

・Easy & quick E-commerce from fixed and mobile・Electronic ticket system with Mobile handset atstadium gate

TV/RadioRecommendation

Authentication & Ｅ-commerce

Fixed & Mobile

・Interoperation with home appliances via FTTH.

・Internet access from TV and blog up the comments.

FMBC Service Image

..And also set the REC ofHDD recorder at home.

Ticket InformationJune xxx – Stadium XJune yyy – Stadium YJuly zzz – Stadium Z

Telecommunication & Broadcasting

Net & Real

Wide display is much better for the sports game.Blog up the comments for sharing the excitement with my friends.

Contribution to the Development of ICT Industry

Through the provisioning of FMBC services, KDDI will contribute the further development of whole ICT

industry that includes content/application layer.

Remote Control