KDDI (9433) investor relations material

Investigation findings and background

• Fictitious circular transactions in the advertising agency business at two subsidiaries spanned from August 2018 to December 2025, involving 99.7% of the business volume and 21 out of 218 business partners, with no similar cases found elsewhere in the group.

• The scheme was initiated by two individuals to cover losses and meet sales targets, with Person A receiving personal benefits and Person B acting under instructions, and no evidence of organized involvement by the parent or other subsidiaries.

• Transactions were structured to appear legitimate, with contracts, invoices, and complex fund flows between agencies, and included measures to avoid detection such as falsified reports and misleading explanations.

• The lack of expertise in the advertising agency business, insufficient risk awareness, and fragmented oversight enabled the scheme to persist undetected for years.

• Internal controls, credit management, and audit processes were inadequate, with overreliance on specific individuals and insufficient segregation of duties.

Financial and operational impact

• Cumulative revenue of JPY 246.1 billion and operating profit of JPY 49.9 billion were reversed due to the fictitious transactions, with operating income down JPY 150.8 billion and net income down JPY 129 billion.

• JPY 32.9 billion flowed out to external parties, and a cumulative impairment loss of JPY 64.6 billion was recorded over three years.

• The company revised its full-year forecast downward, with revenue reduced by JPY 270 billion, operating profit by JPY 88 billion, and net income by JPY 50 billion.

• Amended financial reports and corrections to prior period statements have been filed.

• The advertising agency business will be discontinued, while core telecom and G-Point businesses remain unaffected, and cash flow generation is stable.

Governance, accountability, and recurrence prevention

• Key executives and personnel at the subsidiaries resigned, two employees were dismissed, and disciplinary action was taken against those with supervisory responsibility.

• The parent company’s executives will voluntarily return part of their compensation to clarify management responsibility.

• Root causes included over-reliance on specific individuals, insufficient separation of duties, lack of expertise in new business areas, and weak subsidiary management.

• Recurrence prevention measures include strengthening risk assessment, segregation of duties, partner management, internal controls, credit management, audit methodologies, whistleblowing systems, and group governance.

• A Risk Management Committee and Group Governance Enhancement Measures Meeting have been established to oversee implementation and monitor prevention measures.