KDDI (9433) Status update summary

Investigation findings and background

• Special Investigation Committee found that from August 2018 to December 2025, nearly all advertising agency business at two subsidiaries (BIGLOBE and G-PLAN) consisted of fictitious circular transactions, with 99.7% of sales lacking real advertisers or deliverables.

• The scheme was initiated by two employees to cover business losses and meet sales targets, later becoming unsustainable as transaction volumes grew; Person A received personal benefits, while Person B acted under instructions.

• Transactions involved 21 out of 218 business partners, with elaborate measures to avoid detection, including falsified contracts, invoices, performance reports, and misleading explanations to staff.

• No evidence of organized involvement by the parent company or other subsidiaries was found; the misconduct was limited to the two individuals, and no similar cases were found elsewhere in the group.

• The investigation covered January 14 to March 31, 2026, involving document reviews, digital forensics, interviews with 80 individuals, and a survey of 778 employees.

Financial impact and forecast revisions

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

• External outflows totaled ¥32.9 billion, and impairment losses of ¥64.6 billion were recorded.

• FY2026 revenue forecast was revised downward by ¥270 billion, operating profit by ¥88 billion, and net income by ¥50 billion, reflecting both the incident and changes in the mobile market.

• Financial results for FY26-03 Q3 showed operating revenue up 3.8% and profit for the period up 5.1% year-on-year, with cash flow generation stable.

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

Root causes and governance issues

• Lack of expertise and insufficient risk awareness in the advertising agency business at both subsidiaries and the parent company were identified as key root causes.

• Over-reliance on specific individuals, inadequate segregation of duties, insufficient credit management, and weak internal audits contributed to the prolonged undetected misconduct.

• Weaknesses in subsidiary oversight, fragmented management structures, and insufficient group-wide governance were highlighted.

• The parent company’s group finance management was overly focused on credit limits, with insufficient verification of lending appropriateness.