KDDI (9433) Status update summary

Investigation findings and background

• From August 2018 to December 2025, two employees at subsidiaries orchestrated fictitious circular transactions in the advertising agency business, involving 21 out of 218 agencies and accounting for 99.7% of sales, with no real advertisers or deliverables.

• The scheme was initiated to cover losses and meet sales targets, with false sales and performance reports, isolation of agency contacts, and misleading explanations to staff to avoid detection.

• No similar cases were found in other group subsidiaries, and no evidence of organized involvement by the parent company or other subsidiaries.

• The investigation involved document reviews, digital forensics, interviews with 80 individuals, and a survey of 778 employees.

• Person A received personal benefits from an upstream agency, while Person B acted under instructions without personal gain.

Financial and operational impact

• Cumulative revenue of ¥246.1 billion was reversed, with operating profit reduced by ¥49.9 billion and operating income by ¥150.8 billion; impairment losses totaled ¥64.6 billion and external outflows reached ¥32.9 billion.

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

• Financial results for FY26-03 Q3 showed operating revenue up 3.8% and profit for the period up 5.1% year-on-year.

• The impact is isolated to the advertising agency business and does not affect core telecommunications services or cash flow generation capability.

• 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 allowed the scheme to persist undetected for years.

• Over-reliance on specific individuals, inadequate segregation of duties, weak credit management, and insufficient internal audits were identified as key weaknesses.

• Weaknesses in subsidiary management, fragmented oversight, and parent company focus on P&L rather than business substance contributed to delayed detection.

• The rapid growth of the business and lack of interest in non-core areas contributed to delayed detection.