Company Research and Analysis Report
FISCO Ltd.
http://www.fisco.co.jp

T-Gaia Corporation
3738 Tokyo Stock Exchange First
Section

10-Jun.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato伪伪Aims to Solidify its Top Position in the Industry by
Improving the Competitiveness of Sales Bases andOther Business Segment with Strategic Investments
in Shops and Human Resources
T-Gaia (3738) is Japan’s leading primary mobile phone distributor, with a market share of
approximately 13% for domestic mobile phone sales. The company had 2,155 sales bases as ofMarch 31, 2016, including agents’ shops operated by its secondary distributors and smartphone
accessory shops. In addition, T-Gaia runs solutions business for corporate clients and prepaid
settlement service business involving electronic money.
T-Gaia posted consolidated financial results for FY3/16 with a 3.4% decrease year on year in net
sales to ¥620,074mn and a 9.5% increase in operating income to ¥15,666mn. Sales fell because of adecline in sales volume of mobile phones and other devices of 430,000 units year on year to 4.69mn
units owing to pullback of excessive sales competition and sluggish sales of new models and achange in product composition for the Settlement Services Business. Operating income, meanwhile,
exceeded guidance and reached an all-time high thanks to robust sales of accessories and otherrelated merchandise and tablets, increases in gross income per unit and per customer, and efforts toimprove companywide business efficiency and productivity.
T-Gaia guides for a 0.7% decrease year on year in net sales to ¥616,000mn and a 4.3% decreasein operating income to ¥15,000mn in FY3/17. It expects a decline in sales volume of mobile phones
and other devices of 150,000 units year on year, but aims to expand sales of tablets and smartphonerelated merchandise. T-Gaia intends to broaden the product line-up, including audio accessories,
MVNO items, and IoT devices and other peripheral devices at accessory shops, which continue
to perform well, and increase the shop network from 13 shops at the end of FY3/16. We forecast
tougher competition in the sales’ agent industry amid dramatic changes that taking place in thebusiness environment for the communications industry, including the mobile phone market, but
T-Gaia plans to strengthen the competitiveness of its sales bases and other sites and solidify its top
position in the industry by aggressively making strategic investments in sales bases and people. It
also aims to improve profitability by reinforcing corporate solutions services in the Solutions Businessand to raise sales for the Settlement Services Business by developing new gift-card sales channels
and merchandise.
T-Gaia adheres to a policy of returning profits to shareholders based on a dividend payout ratio
target of 30% or more. Accordingly, for FY3/17 the company plans to increase its dividend for a third
conservative year to ¥52.0 per share, up ¥9.0 year on year (for a payout ratio of 30.1%). It also added
a shareholder benefits program in FY3/16. T-Gaia will issue ¥3,000 gift cards that can be used at its
Smart Labo accessory shops to shareholders at the end of March.

伪伪Check Point• Mobile Telecommunications Business is its core business, selling mobile phones and otherrelated products to consumers and conducting sales agency business operations• Slightly lower net sales but all-time high profits in FY3/16, profitability rose and operating
income in the Mobile Telecommunications Business increased for a third straight period• Significant improvements in the equity ratio and interest-bearing debt ratio

We encourage readers to review our complete legal statement on “Disclaimer” page.
1㻮㼡㼟㼕㼚㼑㼟㼟㻌㻼㼑㼞㼒㼛㼞㼙㼍㼚㼏㼑㻌㼀㼞㼑㼚㼐(¥mn)

㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻌㼟㼏㼍㼘㼑㻕㻝㻘㻜㻜㻜㻘㻜㻜㻜㻤㻜㻜㻘㻜㻜㻜

T-Gaia Corporation㻝㻡㻘㻢㻢㻢

㻝㻠㻘㻤㻣㻟

㻝㻠㻘㻟㻜㻢
㻝㻝㻘㻤㻜㻣

㻠㻜㻜㻘㻜㻜㻜

10-Jun.-16㻝㻡㻘㻜㻜㻜

㻝㻢㻘㻜㻜㻜

㻝㻞㻘㻣㻢㻜

㻝㻞㻘㻜㻜㻜

㻣㻝㻞㻘㻢㻤㻟

㻣㻟㻢㻘㻤㻡㻜

㻣㻜㻣㻘㻜㻜㻠

㻤㻘㻜㻜㻜㻢㻠㻞㻘㻜㻥㻡

㻢㻞㻜㻘㻜㻣㻠

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㻞㻜㻜㻘㻜㻜㻜

㻠㻘㻜㻜㻜㻜

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻞㻜㻘㻜㻜㻜

㻢㻜㻜㻘㻜㻜㻜

3738 Tokyo Stock Exchange First
Section(¥mn)

㻜㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣㻌㻱

㻖㻯㼛㼚㼟㼛㼘㼕㼐㼍㼠㼑㼐㻌㼞㼑㼟㼡㼘㼠㼟㻌㼟㼕㼚㼏㼑㻌㻲㼅㻟㻛㻝㻞

伪伪Business Overview
Mobile Telecommunications Business is its core business,selling mobile phones and other related products to
consumers and conducting sales agency business operations*	PIN (Personal Identification
Number) sales system: An
electronic payment system enabling
online purchases without using acredit card simply by entering a
PIN.

T-Gaia has three business segments. The first is the Mobile Telecommunications Business, whichmainly conducts sales of mobile phones and other related products to consumers, along with agency
operations. The second is the Solutions Business, which serves corporate clients through the sale ofmobile phones and other related products, the provision of solutions services, and contract agency
operations for optical fiber and other fixed-line services. The third is the Settlement Services Businessand Other Business, covering the sale of electronic-money based merchandise, comprising online
payment methods such as PINs* and gift cards, as well as overseas business. Below we review
these businesses.

㻺㼑㼠㻌㻿㼍㼘㼑㼟㻌㼍㼚㼐㻌㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㻵㼚㼏㼛㼙㼑㻌㼎㼥㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻿㼑㼓㼙㼑㼚㼠㻌㻔㻲㼅㻟㻛㻝㻢㻕㻌㻿㼑㼠㼠㼘㼑㼙㼑㼚㼠㻌㻿㼑㼞㼢㼕㼏㼑㼟㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㼍㼚㼐㻌㻻㼠㼔㼑㼞㻌㻮㼡㼟㼕㼚㼑㼟㼟㻿㼛㼘㼡㼠㼕㼛㼚㼟㻌㻮㼡㼟㼕㼚㼑㼟㼟㻹㼛㼎㼕㼘㼑㻌㼀㼑㼘㼑㼏㼛㼙㼙㼡㼚㼕㼏㼍㼠㼕㼛㼚㼟㻌㻮㼡㼟㼕㼚㼑㼟㼟㻝㻜㻜㻚㻜㻑

㻝㻝㻚㻤㻑
㻠㻚㻝㻑

㻥㻜㻚㻜㻑
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㻝㻜㻚㻞㻑
㻝㻡㻚㻜㻑

㻣㻜㻚㻜㻑
㻢㻜㻚㻜㻑
㻡㻜㻚㻜㻑

㻤㻠㻚㻝㻑

㻠㻜㻚㻜㻑

㻣㻠㻚㻤㻑

㻟㻜㻚㻜㻑

㻞㻜㻚㻜㻑
㻝㻜㻚㻜㻑
㻜㻚㻜㻑
㻺㼑㼠㻌㻿㼍㼘㼑㼟㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㻵㼚㼏㼛㼙㼑We encourage readers to review our complete legal statement on “Disclaimer” page.
2

■■Business Overview(1) Mobile Telecommunications Business

T-Gaia Corporation
3738 Tokyo Stock Exchange First
Section

10-Jun.-16

Net sales of this business encompass such telecommunication devices as consumer mobile phones
and tablets, accessories and other merchandise, as well as received commission for services
based on agency agreements with telecommunications carriers. In FY3/16, device and commission
accounted for just over 60% and just under 40% of net sales respectively. Device has accounted
for a gradually rising proportion of sales in recent years. This is likely because the company has
expanded sales of such new merchandise as tablets and accessories. Operating margin has risen
since FY3/14 as a result of successful sales channel normalization and business efficiency efforts.

㻹㼛㼎㼕㼘㼑㻌㼀㼑㼘㼑㼏㼛㼙㼙㼡㼚㼕㼏㼍㼠㼕㼛㼚㼟㻌㻺㼑㼠㻌㻿㼍㼘㼑㼟㻌㼍㼚㼐㻌㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㻹㼍㼞㼓㼕㼚㻌㻰㼑㼢㼕㼏㼑㼟㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼙㼍㼞㼓㼕㼚㻌㻔㼞㼕㼓㼔㼠㻌㼟㼏㼍㼘㼑㻕(¥mn)

㻭㼓㼑㼚㼏㼥㻌㼏㼛㼙㼙㼕㼟㼟㼕㼛㼚㼟㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕㻤㻜㻜㻘㻜㻜㻜

㻞㻚㻞

㻞㻚㻝

（㻑）
㻞㻚㻠

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Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻢㻜㻜㻘㻜㻜㻜

㻠㻜㻜㻘㻜㻜㻜

㻞㻜㻜㻘㻜㻜㻜

㻝㻚㻤

㻝㻚㻡

㻝㻚㻠

㻞㻞㻠㻘㻡㻥㻢

㻞㻢㻝㻘㻣㻞㻜

㻞㻠㻡㻘㻢㻞㻥

㻞㻠㻜㻘㻣㻞㻟

㻞㻜㻥㻘㻥㻞㻞

㻟㻝㻠㻘㻜㻝㻣

㻟㻠㻟㻘㻜㻠㻜

㻟㻟㻡㻘㻣㻝㻢

㻟㻞㻟㻘㻢㻣㻜

㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻝㻚㻞㻜㻚㻢㻟㻥㻟㻘㻤㻝㻢

㻜㻜㻲㼅㻟㻛㻝㻢

The Mobile Telecommunications Business had 2,155 sales bases at the end of March 2016 (including
agencies operated by its secondary distributors and overseas sites), a decline of 23 sites from a year
earlier. This network included 1,241 carrier shops, 232 shops dealing multicarrier brands, 661 home
appliance stores and GMSs, and 13 accessory shops (of which one on an e-commerce site). The
company has the largest number of sales bases in Japan. It has the top market share, accounting
for around 13% of the total mobile phone unit sales in Japan. It is worth noting that the company
has well-balanced inner share among NTT DoCoMo <9437>, au (KDDI) <9433>, and the SoftBank
Group <9984> in terms of its mobile phone unit sales.

㻺㼡㼙㼎㼑㼞㻌㼛㼒㻌㻿㼔㼛㼜㼟㻯㼍㼞㼞㼕㼑㼞㻌㼟㼔㼛㼜㼟㻿㼔㼛㼜㼟㻌㼐㼑㼍㼘㼕㼚㼓㻌㼙㼡㼘㼠㼕㻙㼏㼍㼞㼞㼕㼑㼞㻌㼎㼞㼍㼚㼐㼟㻴㼛㼙㼑㻌㼍㼜㼜㼘㼕㼍㼚㼏㼑㻌㼟㼠㼛㼞㼑㼟㻌㼍㼚㼐㻌㻳㻹㻿㼟㻭㼏㼏㼑㼟㼟㼛㼞㼥㻌㼟㼔㼛㼜㼟㻌㻔㼕㼚㼏㼘㼡㼐㼕㼚㼓㻌㼑㻙㼏㼛㼙㼙㼑㼞㼏㼑㻌㼟㼔㼛㼜㼟㻕㻯㼔㼕㼚㼍㻔㻿㼔㼛㼜㼟㻕㻌
㻟㻘㻡㻜㻜

㻟㻘㻠㻝㻞

㻟㻘㻝㻜㻣

㻟㻘㻜㻜㻜
㻝㻘㻞㻟㻢

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㻞㻘㻜㻜㻜

㻝㻘㻞㻠㻝
㻡㻥㻢
㻡㻡㻞

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㻞㻘㻟㻥㻤

㻝㻘㻡㻤㻜

㻝㻘㻟㻜㻞

㻡㻜㻜

㻤㻟㻜
㻡
㻲㼅㻟㻛㻝㻟 㻣㻜㻲㼅㻟㻛㻝㻞

㻞㻘㻝㻡㻡

㻝㻘㻝㻥㻠

㻝㻘㻞㻠㻝

㻞㻡㻜

㻞㻟㻞

㻝㻘㻞㻞㻝

㻟㻞㻠

㻝㻘㻜㻜㻜

㻞㻘㻝㻣㻤

㻝㻟
㻲㼅㻟㻛㻝㻠 㻝㻜㻣㻝㻞㻲㼅㻟㻛㻝㻡

㻢㻢㻝
㻝㻠
㻤

㻝㻟

㻲㼅㻟㻛㻝㻢 㻤㻔㻲㼕㼟㼏㼍㼘㻌㼥㼑㼍㼞㻙㼑㼚㼐㻕We encourage readers to review our complete legal statement on “Disclaimer” page.
3

■■Business Overview(2) Solutions Business

T-Gaia Corporation
3738 Tokyo Stock Exchange First
Section

10-Jun.-16

Important disclosuresand disclaimers appear
at the end of this document.

The Solutions Business includes solution services for corporate clients that sells mobile phones andmakes optimal proposals to resolve issues at these clients, such as terminal and device management
services; optical fiber agency services, such as FTTH for both corporations and consumers; andhigh volume data transmission services utilizing the cloud infrastructure of WAM!NET Japan, whichbecame its subsidiary in March 2014.
Among these services, the sales of mobile phones follow more or less the same business modelas the consumer-oriented Mobile Telecommunications Business. The terminal and ID management
services provide usage management, charge settlement, simulations of an ideal pricing plan, payment
agency and other services related to various telecommunication devices and IDs used by corporateclients, such as mobile phones, smartphones, tablets and fixed lines. These solution services arebundled into the “movino star” application service provider (ASP) managed service provided by thecompany, which is a service that enhances operational efficiency at its corporate clients and cuts
their costs. The number of movino star subscriber IDs has steadily expanded, reaching 493,000 asof the end of March 2016.

㻺㼡㼙㼎㼑㼞㻌㼛㼒㻌㼙㼛㼢㼕㼚㼛㻌㼟㼠㼍㼞㻌㼟㼡㼎㼟㼏㼞㼕㼎㼑㼞㻌㻵㻰㼟㻔㻝㻜㻘㻜㻜㻜㻌㻵㻰㼟㻕FISCO Ltd. Analyst
Yuzuru Sato

㻡㻜

㻠㻢㻚㻟

㻠㻡
㻟㻢㻚㻥

㻠㻜
㻟㻞㻚㻢

㻟㻡
㻟㻜

㻟㻥㻚㻡

㻞㻤㻚㻢

㻞㻡

㻞㻜
㻝㻡
㻝㻜
㻡
㻜
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㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢
㻔㻲㼕㼟㼏㼍㼘㻌㼥㼑㼍㼞㻙㼑㼚㼐㻕(3) Settlement Services Business and Other Business
The Settlement Services Business involves sales of electronic money-based merchandise and giftcards using PIN sales systems through major convenience stores and other retail outlets throughout
Japan. As of the end of March 2016, the business has just over 55,000 sales bases. The merchandise
handled includes Amazon, iTunes, Google Play, and gift cards, as well as WebMoney and BitCashin PIN merchandise.
The method of calculating net sales differs for gift cards and PIN merchandise. For gift cards, thecompany records only the commission received from the operators as net sales, while for PIN
merchandise the total transaction amount (face value amount) is recorded as net sales. Sales
are nominally trending downward, as demand has recently shifted from PINs to gift cards, but thecompany is sustaining double-digit annual growth in gift card transactions, and gross transaction
value is steadily expanding. Transaction composition on a face-value basis is about 40% in PINs andabout 60% in gift cards.
Overseas, the company runs seven China Unicom shops in Shanghai through an agency agreementwith that carrier. Also in China, the company sells mobile phones and solutions services to the local
units of Japanese companies. In Singapore, the company sells gift cards through convenience andelectronics stores and is sustaining healthy business.

We encourage readers to review our complete legal statement on “Disclaimer” page.
4

伪伪Financial Results Trends

T-Gaia Corporation
3738 Tokyo Stock Exchange First
Section

10-Jun.-16

Important disclosuresand disclaimers appear
at the end of this document.

Slightly Lower Net Sales but All-Time High Profits in FY3/16,
Profitability Rose and Operating Income in the Mobile
Telecommunications Business Increased for a Third Straight
Period(1) Overview of FY3/16 Results
In FY3/16 consolidated results, net sales declined 3.4% year on year to ¥620,074mn, operating
income rose 9.5% to ¥15,666mn, ordinary income climbed 10.0% to ¥15,621mn, and net income
attributable to owners of the parent rose 22.6% to ¥9,498mn. Sales fell because of a decline insales volume of mobile phones and other devices and a change in product composition for the
Settlement Services Business. Income, meanwhile, reached an all-time high on a rise in Mobile
Telecommunications Business profit thanks to robust sales of tablets and accessories and otherrelated merchandise and increases in average prices per unit and per customer and a large profit
advance for Settlement Services Business and Other Business. Compared to guidance, although
net sales missed by 5.3% on the decline in mobile phone sales and other factors, operating income
overshot by 4.4% mainly due to improvements in companywide business efficiency and productivity
and Settlement Services Business and Other Business upside.

FISCO Ltd. Analyst
Yuzuru Sato

Consolidated Financial Results in FY3/16
FY3/15Net sales
Gross margin
Selling, general andadministrative expenses
Operating income
Ordinary income
Net income attributable toowners of the parent

FY3/16(¥mn)

ActualRatio tonet sales

Full-year
forecasts

ActualRatio tonet sales

642,095
61,98447,6779.7%
7.4%

655,000
63,50048,500620,074
63,38147,71410.2%
7.7%

Comparedwith
YoY
full-year
forecasts
-3.4%
-5.3%
2.3%
-0.2%
0.1%
-1.6%

14,306
14,1942.2%
2.2%

15,00014,90015,666
15,621

2.5%
2.5%

9.5%
10.0%

4.4%
4.8%

7,748

1.2%

9,000

9,498

1.5%

22.6%

5.5%

Sales volume for mobile phones and other devices dropped by 430,000 units year on year to
4.69mn units owing to pullback of excessive sales competition and slower sales of new models
than anticipated. Sales were steadily lower than the previous year from 2Q at the quarterly level.
While observers were concerned about the impact in 4Q of curtailing sales of “zero-cost handsets”
to comply with the Ministry of Internal Affairs and Communications’ policy, we think the actual impact
was minor because the decline margin narrowed from 2Q and 3Q levels. Furthermore, the ratio ofsmart devices (smartphones and tablets) climbed to about 77%.

㻺㼡㼙㼎㼑㼞㻌㼛㼒㻌㻹㼛㼎㼕㼘㼑㻌㻼㼔㼛㼚㼑㼟㻌㻿㼛㼘㼐㻔㻝㻜㻘㻜㻜㻜㻌㼡㼚㼕㼠㼟㻕㻌
㻣㻜㻜

㻢㻠㻢㻌

㻢㻞㻢㻌
㻡㻢㻜㻌

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㻠㻢㻥㻌

㻡㻜㻜

㻠㻜㻜
㻟㻜㻜
㻞㻜㻜
㻝㻜㻜
㻜

㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻺㼛㼠㼑㻦㻌㻵㼚㼏㼘㼡㼐㼕㼚㼓㻌㼃㼕㻙㻲㼕㻌㼠㼍㼎㼘㼑㼠㼟We encourage readers to review our complete legal statement on “Disclaimer” page.
5

■■Financial Results Trends㻺㼡㼙㼎㼑㼞㻌㼛㼒㻌㻹㼛㼎㼕㼘㼑㻌㻼㼔㼛㼚㼑㼟㻌㻿㼛㼘㼐㻌㼍㼚㼐㻌㻿㼙㼍㼞㼠㻌㻰㼑㼢㼕㼏㼑㻌㻾㼍㼠㼕㼛㻿㼍㼘㼑㼟㻌㼢㼛㼘㼡㼙㼑㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕㻔㻝㻜㻘㻜㻜㻜㻌㼡㼚㼕㼠㼟㻕㻌
㻝㻢㻜
㻝㻠㻜
㻢㻡㻚㻜㻑

T-Gaia Corporation

㻣㻣㻚㻞㻑

㻣㻜㻚㻝㻑

㻣㻠㻚㻜㻑

㻣㻡㻚㻥㻑

㻥㻜㻑

㻤㻜㻚㻝㻑

㻤㻜㻑
㻣㻜㻑

㻝㻞㻜

3738 Tokyo Stock Exchange First
Section

㻢㻜㻑

㻝㻜㻜

㻡㻜㻑

㻤㻜

㻝㻠㻜

㻝㻞㻥

㻢㻜

㻝㻠㻜
㻝㻜㻟

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10-Jun.-16

㻝㻝㻞

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㻝㻞㻥

㻠㻜㻑
㻟㻜㻑

㻠㻜

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Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻣㻣㻚㻤㻑㻿㼙㼍㼞㼠㻌㼐㼑㼢㼕㼏㼑㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻌㼟㼏㼍㼘㼑㻕

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㻝㻽

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㻲㼅㻟㻛㻝㻡㻞㻽㻟㻽㻠㻽㻲㼅㻟㻛㻝㻢

(2) Business Segment Trends○Mobile Telecommunications BusinessNet sales fell 2.3% year on year to ¥521,221mn, while operating income advanced 5.3% to¥11,718mn. Although sales of mobile phones and other devices declined by 440,000 units year on
year to 4,500,000 units, sales of tablets rose at a double-digit pace and accessories, contents, andother related merchandise remained upbeat with a 25% gain. Gross income increased at unit andcustomer levels. Additionally, segment operating income expanded for a third straight fiscal year
thanks to continued efforts to improve efficiency and raise productivity in sales base operations.

㻹㼛㼎㼕㼘㼑㻌㼀㼑㼘㼑㼏㼛㼙㼙㼡㼚㼕㼏㼍㼠㼕㼛㼚㼟㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻾㼑㼟㼡㼘㼠㼟㻌(¥mn)

㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻌㼟㼏㼍㼘㼑㻕㻣㻜㻜㻘㻜㻜㻜

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(¥mn)

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㻡㻣㻢㻘㻠㻟㻥

㻡㻟㻟㻘㻡㻥㻟

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Differences in sales staff skills are directly impacting the customer draw and profitability of sales
bases more than in the past because of changes in the sales measures used by telecom carriers,
adoption of new rate plans, and addition of a wider range of products and services, such as opticalfiber lines, and we think T-Gaia’s aggressive investments in personnel training over the past few
years are contributing to higher profitability.
Sales at Smart Labo smartphone accessory shops expanded by a robust 24% year on year. We
attribute this trend to recent additions of fashionable headphones, earphones, and other audio
devices to the product line-up that are driving a related steady upward trend in average spending
per customer, in contrast to past emphasis on protective films and cases and covers as the main
products. Income improved in 4Q with most of the company’s 13 shops reaching profitability.

We encourage readers to review our complete legal statement on “Disclaimer” page.
6

■■Financial Results Trends

T-Gaia Corporation
3738 Tokyo Stock Exchange First
Section

10-Jun.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

○Solutions BusinessNet sales dropped 2.4% year on year to ¥25,618mn and operating income fell 5.6% to ¥2,357mn
in the Solutions Business, which handles mobile and fixed-line network businesses for corporateclients. Sales of mobile phones and other devices rose by 2,000 units year on year to 186,000
units. Kitting service, help desk service, and other support services and “movino star” corporate
communication line and devices management service performed well too. These trends drove a risein corporate mobile business sales. The main source of the decline in segment sales, meanwhile,
was the drop in sales of conventional FTTH and other optical line services accompanying changes
in the business model for fixed-line products.
Although sales climbed for various solution services in the corporate mobile business andoptical collaboration and other new fixed-line products, income slipped due to ramp up of systemdevelopment related to upgrading movino star and investments in human resources to strengthen
proposal-type sales.
For movino star, the company added a new feature from fall 2015 to manage customers’ Wi-Fi-based
devices and other assets are not outfitted to connect to telecom lines. It also provides a management
screen and other features that enhance usability and significantly improve operability. The major
upgrade helped to acquire new contracts and boosted additional contracts at existing customers.
T-Gaia increased the number of subscriber IDs by 98,000 from the end of the previous year to493,000 at the end of March 2016. Additionally, T-Gaia started wholesale business to electricalinstallation firms and others from January 2016 for resale of the TG Hikari optical access service
to corporate clients. Wholesale customers benefit from the ability to sell optical lines under theirown brand and quick ramp-up of Hikari Collaboration business thanks to provision of the TG Optical
Support Package that packages a variety of support services (such as start-up support, systemrelated support, and billing-related support) at the time of business ramp-up. T-Gaia has alreadyrecruited about 100 resellers and is targeting 200 companies by March 2017.

㻿㼛㼘㼡㼠㼕㼛㼚㼟㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻲㼕㼚㼍㼚㼏㼕㼍㼘㻌㻾㼑㼟㼡㼘㼠㼟(¥mn)
㻟㻡㻘㻜㻜㻜

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(¥mn)

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○Settlement Services Business and Other BusinessNet sales fell 10.9% year on year to ¥73,234mn, while operating income climbed 132.6% to¥1,591mn. The decline in net sales was mainly caused by a shift in demand from PIN merchandise,
where the face value amount of all transactions is recorded as net sales, to gift cards where only thereceived commission is recorded as net sales. Earnings, meanwhile, rose sharply owing to healthy
growth in transaction value and recognition of one-time income in 4Q.
In overseas business, T-Gaia received profit boosts from improved income in its mobile phone sales
operations in China by streamlining efficiency and enhancing productivity to lower administrative
costs and a rapid roughly five-fold year on year rise in gift card sales for the settlement services
business in Singapore.

We encourage readers to review our complete legal statement on “Disclaimer” page.
7

■■Financial Results Trends㻿㼑㼠㼠㼘㼑㼙㼑㼚㼠㻌㻿㼑㼞㼢㼕㼏㼑㼟㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㼍㼚㼐㻌㻻㼠㼔㼑㼞㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻲㼕㼚㼍㼚㼏㼕㼍㼘㻌㻾㼑㼟㼡㼘㼠㼟(¥mn)

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㻞㻘㻜㻜㻜
㻝㻘㻡㻥㻝

㻝㻜㻜㻘㻜㻜㻜

T-Gaia Corporation
3738 Tokyo Stock Exchange First
Section

(¥mn)

㻝㻘㻡㻜㻜
㻤㻜㻘㻜㻜㻜

㻢㻜㻘㻜㻜㻜

㻝㻘㻜㻜㻜

㻣㻣㻤

㻢㻤㻠

㻠㻜㻘㻜㻜㻜

10-Jun.-16㻞㻜㻘㻜㻜㻜

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻝㻜㻞㻘㻜㻝㻠

㻤㻞㻘㻞㻟㻤

㻣㻟㻘㻞㻟㻠

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻜㻡㻜㻜㻜伪伪Outlook
Continuing to Focus on Sales of Smartphone-Related
Products and Tablets, though Actively Enhancing Strategic
Investments for Its Future Growth(1) Financial forecasts for FY3/17
For FY3/17, T-Gaia expects a 0.7% decline year on year in net sales to ¥616,000mn, a 4.3% drop
in operating income to ¥15,000mn, a 4.3% decline in ordinary income to ¥14,950mn, and a 2.1%
rise in net income attributable to owners of the parent to ¥9,700mn. It projects a decline in mobile
phone sales volume of 150,000 units year on year to 4.54mn units. While T-Gaia still aims to increase
gross profit per unit and customer by focusing on sales of accessories and other related products,
just as in FY3/16, it anticipates lower operating income because of aggressive promotion of strategic
investments to bolster competitiveness, improve customer satisfaction at sales bases with moves,renovations, and expansions, and train staff. It expects an increase in net income because of a lower
effective tax rate and other factors. Below we review segment outlook trends.
Consolidated Financial Forecasts for FY3/17

Net sales
Operating income
Ordinary income
Net income attributable to owners of the parent
Number of mobile phones sold (10,000 units)*	MVNO (Mobile Virtual Network
Operator) Operators supplying
voice and data communications
services over infrastructure leased
from other companies without
owning their own mobile phone
or wireless communications
infrastructure.

FY3/16
Ratio to net
Actualsales
620,074
15,666
2.5%
15,621
2.5%
9,498
1.5%
469

Full-year
forecasts
616,000
15,00014,9509,700
454

FY3/17
Ratio to net
sales
2.4%
2.4%
1.6%

(¥mn)
YoY
-0.7%
-4.3%
-4.3%
2.1%
-150,000 units○Mobile Telecommunications Business
T-Gaia expects a 1.2% year on year decline in sales to ¥515,000mn and a 2.7% drop in operating
income to ¥11,400mn. It projects a decline in mobile phone and other device sales volume of
140,000 units to 436mn units due to a tougher business environment with pullback of excessive sales
competition and wider use of low-cost MVNO* smartphones. However, it only expects a slight drop in
overall sales because of a continuing sales focus on accessories, contents, and other smartphonerelated products and tablets. It guides for a profit decline due to aggressive promotion of strategic
investments in sales bases, staff training, and other areas.

We encourage readers to review our complete legal statement on “Disclaimer” page.
8

■■Outlook

T-Gaia is adding sales of electricity service and insurance products from FY3/17. It is offering
electricity service at au and Softbank shops from April. While the product impact on profitability should
be limited, T-Gaia is looking for a rise in store traffic. It started handling various insurance products(contract continuation) at au shops and plans to begin sales of life insurance at NTT docomo shops
in fall 2016. It will just start with a few shops handling these products nationwide for the time being
and will review the addition of more shops based on results.

T-Gaia Corporation
3738 Tokyo Stock Exchange First
Section

10-Jun.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

T-Gaia aims to boost customer draw and raise profitability and customer satisfaction by expanding
the scope of products and services handled by mobile shops beyond mobile phones to opticallines, electricity, insurance, and other life infrastructure and thereby converting these sites into
comprehensive shops that propose and provide a wide range of products and services related tocustomer lives. This evolution requires further improvement of the skills of sales staff. The shift tomore sophisticated products and services as well as complex rate plans extends time interacting withcustomers at shops, and differences in skill levels hence become a major factor influencing efficiency
and productivity. T-Gaia was an industry leader with the creation of the TG Academy as an internal
education and training entity, and its focus on staff education and training has earned it an excellent
reputation for personnel training capabilities. It plans to improve skills throughout the company byrecruiting high-quality staff as employees.
T-Gaia expects to keep the number of direct-operation mobile shops at roughly the same level as in
FY3/16. However, it intends to boost customer draw, profitability and customer satisfaction at sales
bases by continuing to aggressively invest in moves, renovations, and expansions. Smart Labo
accessory shops are sustaining upbeat sales, and T-Gaia plans to increase shop volume from 13
sites at the end of FY3/16 to about 20 sites fairly soon. It will be expanding shop sales floors andwidening product line-ups to fuel higher sales growth as these shops broaden sales items fromprotective films and cases and covers to audio devices (headphones and earphones) and others.
Osaka-based Smart Labo Namba Ebisubashi started selling handsets without SIM locks in FY3/16,
and T-Gaia intends to begin handling these handsets at new shops and other locations too in FY3/17,
including Smart Labo Shinjuku Higashiguchi.
○Solutions Business
T-Gaia projects a 2.4% year on year decline in net sales to ¥25,000mn and a 4.8% increase inoperating income to ¥2,470mn. While it guides for lower sales because of the impact of an anticipateddrop in mobile phone and other device sales volume of 10,000 units to 176,000 units, the company
expects higher earnings thanks to solutions services, a rise in movino star contract volume, andpromotion of TG Hikari resale business.
○Settlement Services Business and Other Business
T-Gaia expects a 3.8% year on year rise in sales to ¥76,000mn and a 29.0% drop in operating
income to ¥1,130mn. It guides for stronger sales thanks to slowdown of the decline pace for PIN
merchandise in settlement services and steep gift-card sales advances due to development of newsales channels and products. It projects an earnings decline because of removal of one-time profit
booked in FY3/16 and pursuit of investments in sales-related systems and strategic outlays for
aggressive sales measures. T-Gaia only has overseas settlement operations in Singapore, but plansto review entries into nearby countries in FY3/17. It also factors in continued improvements for themobile shop business in China.
Net Sales and Operating Income by Business Segment

Net Sales by Business Segment
Mobile Telecommunications
Solutions
Settlement Services and Other Business
Total
Operating Income by Business Segment
Mobile Telecommunications
Solutions
Settlement Services and Other Business
Total

FY3/15

FY3/16

FY3/17 E

(¥mn)
YoY

533,593
26,26382,238642,095

521,221
25,61873,234620,074

515,000
25,00076,000616,000

-1.2%
-2.4%
3.8%
-0.7%

11,123
2,498
684
14,306

11,7182,357
1,591
15,666

11,4002,470
1,130
15,000-2.7%
4.8%-29.0%-4.3%

We encourage readers to review our complete legal statement on “Disclaimer” page.
9

伪伪Financial Status and Shareholder Return Policy
Significant Improvements in the Equity Ratio and InterestBearing Debt Ratio

T-Gaia Corporation
3738 Tokyo Stock Exchange First
Section

10-Jun.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

(1) Financial status
Looking at financial conditions at end-March 2016, total asset value dropped by ¥4,150mn year on
year to ¥85,930mn. Under current assets, trade receivable were down by ¥3,610mn and merchandise
inventory fell by ¥1,670mn due to the decline in period-end sales, but cash and deposits roseby ¥1,229mn and other accounts receivable increased by ¥817mn. Under fixed assets, goodwill
declined by ¥1,191mn.
Liabilities were down by ¥10,883mn year on year to ¥49,911mn, including declines in interest-bearing
debt of ¥8,674mn and accounts payables of ¥2,502mn. Net asset value rose by ¥6,732mn year on
year to ¥36,018mn. Profit surplus increased by ¥6,714mn due to booking a net profit.
For key business indicators, the equity ratio that reflects stability climbed from FY3/15’s 32.3% to41.7%, and the interest-bearing debt ratio dropped from 111.8% to 66.7%. These changes indicate
healthier financial standing. In profitability, T-Gaia sustained ROE at a high level of 29.3% andcontinued an upturn in operating margin of 0.3ppt to 2.5%. We believe the company is making steadyadvances in improving its financial standing and profit margin.
T-Gaia conducted a public-offering share buyback for the 1,304,000 shares (16.5% of outstanding
share volume) held by Mitsubishi Corporation, its second largest shareholder, in April 2016. It paid
¥12,771mn at a price of ¥979 per share. Although the interest-bearing debt ratio will temporarily risebecause T-Gaia used existing credit lines from financial institutions to purchase the shares, we donot see any issues with the company’s cash flow and expect a contribution to better capital efficiency
in FY3/17.
Consolidated Balance Sheet

Current assets(Cash and deposits)(Merchandise inventory)
Fixed assets
Total assets
Current liabilities
Fixed liabilities(Interest-bearing debt)
Total liabilities
Total net assets(Stability ratios)
Equity ratio
Interest-bearing debt ratio(Profitability ratios)
ROE (net income / shareholders' equity)
Operating income to sales ratio

FY3/1488,2273,490
45,146
16,364
104,592
68,427
12,45050,93480,87823,713

FY3/1575,0292,085
37,612
15,051
90,08054,2436,550
32,55160,79429,286

FY3/16
72,276
3,314
35,942
13,65385,93032,955
16,95623,87749,91136,01822.6%
215.9%

32.3%
111.8%

41.7%
66.7%

26.4%
1.8%

29.4%
2.2%

29.3%
2.5%

(¥mn)
Changes-2,752
1,229-1,670-1,397-4,150-21,288
10,405-8,674-10,883
6,732

We encourage readers to review our complete legal statement on “Disclaimer” page.
10

■■Financial Status and Shareholder Return Policy

Plans to Increase the Dividend by ¥9.0 to ¥52.0 in FY3/17(2) Shareholder returns policy

T-Gaia Corporation
3738 Tokyo Stock Exchange First
Section

10-Jun.-16

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

The company’s shareholder returns policy is mainly to return profits to shareholders through dividends
with a payout ratio goal of at least 30%. In FY3/16, T-Gaia lifted the dividend by ¥2 from the periodstart target of ¥41.0 to ¥43.0, including support from earnings beating guidance. It is targeting a ¥9.0
hike year on year to ¥52.0 in FY3/17 (30.1% dividend payout ratio). The steep dividend hike, despite
just a 2.1% projected rise in net income, reflects a hefty anticipated increase in EPS from FY3/16’s¥138.1 to ¥172.7 in FY3/17 thanks to share buybacks.
T-Gaia also added a shareholder benefits program in FY3/16. It will issue ¥3,000 gift cards that canbe used at its Smart Labo accessory shops (including the online store) to shareholders at the end of
March. Those shareholders not interested in using the gift card can donate the funds to Japan Red
Cross in exchange for returning the unused gift card.

㻰㼕㼢㼕㼐㼑㼚㼐㻌㻼㼑㼞㻌㻿㼔㼍㼞㼑㻌㼍㼚㼐㻌㻰㼕㼢㼕㼐㼑㼚㼐㻌㻼㼍㼥㼛㼡㼠㻌㻾㼍㼠㼕㼛(¥)

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（㻑）

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㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣㻌㻱

We encourage readers to review our complete legal statement on “Disclaimer” page.
11

Disclaimer
FISCO Ltd. (the terms “FISCO”, “we”, mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock
price and index information. The trademark and value of the “JASDAQ INDEX” are theintellectual properties of the Tokyo Stock Exchange, and therefore all rights to them belong
to the Tokyo Stock Exchange.
This report is based on information that we believe to be reliable, but we do not confirm or
guarantee its accuracy, timeliness,or completeness, or the value of the securities issued bycompanies cited in this report. Regardless of purpose,investors should decide how to use
this report and take full responsibility for such use. We shall not be liable for any result of its
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or any other action.
This report was prepared at the request of its subject company using information provided
by the company in interviews, but the entire content of the report, including suppositions andconclusions, is the result of our analysis. The content of this report is based on informationthat was current at the time the report was produced, but this information and the content
of this report are subject to change without prior notice.
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The final selection of investments and determination of appropriate prices for investment
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