MIRAIT Holdings 1417
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Summary
The Mirait corporate group is one of three major telecommunications construction companies. The company was established in October 2010 through the integration of Daimei Telecom Engineering Corp., Commuture Corp., and Todentsu Corp.—companies involved in telecoms infrastructure construction for over half a century—under a holding company. In October 2012, the group businesses were restructured to improve operating efficiency and merged to form the current consolidated entity of Tokyo-based Mirait Corporation and Osaka-based Mirait Technologies Corporation under Mirait Holdings. The group also acquired Lantrovision (S) Ltd. in June 2016.
Construction & Engineering
Key dates
2013-01-30
Coverage initiation
Executive summary
A major telecom engineering company aggressively developing business in other fields
The MIRAIT corporate group is one of three major telecommunications construction companies. The company was established in October 2010 through the integration of Daimei Telecom Engineering Corp., Commuture Corp., and Todentsu Corp.—companies involved in telecoms infrastructure construction for over half a century—under a holding company. In October 2012, the group businesses were restructured to improve operating efficiency and merged to form the current consolidated entity of Tokyo-based MIRAIT Corporation and Osaka-based MIRAIT Technologies Corporation under MIRAIT Holdings. In June 2016, the group also acquired Lantrovision (S) Ltd., which designs, constructs, and maintains LAN cables, primarily in Singapore. In October 2018, it merged with TTK Co., Ltd. through an exchange of shares. Furthermore, in January 2019, the group merged with Solcom Co., Ltd. and Shikokutsuken Co., Ltd. through share exchanges.
The company has four business categories: the NTT, Multi-carrier, Environmental and Social Innovation, and ICT Solutions businesses. The NTT and Multi-carrier businesses serve the capital investment needs of legacy telecoms companies, and accounted for approximately 55% of consolidated sales in FY03/21. The company is trying to wean itself from a structure reliant on telecoms’ capex activities, and is aggressively pursuing non-telecoms services. Specifically, it is aggressively expanding into other fields, including construction work for solar power generation facilities, recurring income-type businesses such as operation management and maintenance of such facilities, software development, global businesses with a focus on Asia, and even a drone business. As a result, the ratio of sales from non-telecoms services increased from about 29% in FY03/14 to 45% in FY03/21. (See the Business section for more information.)
Trends and outlook
Full-year FY03/22 results: In FY03/22, orders received amounted to JPY521.3bn (+9.8% YoY). Excluding the construction contracts carried forward at Seibu Construction Co., Ltd.*, orders totaled JPY463.2bn (-2.5% YoY). Sales came to JPY470.4bn (+1.4% YoY), and construction contracts carried forward was JPY208.4bn (-29.0% YoY) or JPY150.3bn (-7.0% YoY) when excluding those of Seibu Construction. Operating profit was JPY32.8bn (+8.9% YoY), recurring profit reached JPY34.2bn (+7.6% YoY), and net income attributable to owners of the parent was JPY25.2bn (+4.0% YoY). The gross profit margin was 14.1% (+1.0pp YoY), and the SG&A-to-sales ratio was 7.1% (+0.5pp YoY). Operating profit margin came to 7.0% (+0.5pp YoY). The company recorded a JPY3.3bn gain on sales of investment securities (-JPY1.4bn YoY).
Full-year company forecast for FY03/23: The company forecast for FY03/23 calls for orders of JPY540.0bn (+3.6% YoY), sales of JPY540.0bn (+14.8% YoY), operating profit of JPY30.0bn (-8.5% YoY), recurring profit of JPY31.0bn (-9.2% YoY), net income attributable to owners of the parent of JPY20.0bn (-20.5% YoY), and an annual dividend of JPY60.00 per share (JPY55.00 in FY03/22).
Concern lingers over prolonged uncertainties in the business environment. Nonetheless, the company will work to expand new solution-based businesses including the renewable energy business (for example, solar power) targeting a carbon-free society, and construction projects associated with data centers and cloud systems. It will also seek to transform its business structure by strengthening inter-group collaboration. Full-year earnings contribution is expected from Seibu Construction, which was made a consolidated subsidiary in FY03/22.
The MIRAIT group has redefined its raison d'être (purpose) and social mission, incorporating the aspirations of its 14,000 staff, and aims to evolve into a corporate group that can contribute more firmly to solving various social challenges in a wide range of social infrastructure domains. Looking toward 2030, it plans to formulate a new business vision dubbed MIRAIT ONE Group Vision 2030. At the same time, as of May 13, 2022, it plans to formulated a five-year medium-term management plan starting FY03/23, and will seek to achieve the targets set forth in the plan.
Strengths and weaknesses
Shared Research sees the company’s strengths as its stable cash flow, its ability to benefit from telecom sophistication, and its financially sound business model; its weaknesses are heavy dependence on capex by telecom carriers, low profitability in the industry overall, and difficulty establishing new businesses. (See the Strengths and weaknesses section for details.)
Key financial data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures for FY03/11 and earlier are the simple aggregate of the three integrated companies. FY03/11 net income and financial ratios exclude negative goodwill of JPY26.9bn.
Note: The company changed its category classifications in FY03/15. Category sales figures in table reflect the new classifications. The figures for FY03/14 are restated for comparison purposes.
Note: The breakdown of orders and sales in FY03/22 has been adjusted based on the new business classifications applied from the FY03/23 company forecast (there is no continuity from figures through FY03/21).
Recent updates
Company unveils "MIRAIT ONE Group Vision 2030" and new medium-term business plan
On May 17, 2022, MIRAIT Holdings Corp. unveiled its long-term vision, MIRAIT ONE Group Vision 2030, and its new medium-term business plans covering the years from FY03/23 through FY03/27.
MIRAIT ONE Group Vision 2030
Basic thinking underlying long-term vision
Ahead of the transformational merger between MIRAIT Holdings Corp. and consolidated subsidiaries MIRAIT Corporation and MIRAIT Technologies Corporation to form MIRAIT ONE Group on July 1, 2022, the company redefined its raison d'être (purpose) and social mission, incorporating the aspirations of its 14,000 executives and employees. Dubbed MIRAIT ONE Group Vision 2030, the long-term vision looking out to 2030 is aimed at guiding the company's efforts as it works towards the creation of a corporate group that will better contribute to the resolution of various social issues in the area of social infrastructure (as broadly defined).
Overview of management strategy
With the group's strategic growth plans under the long-term vision calling for specific changes in five key areas, the keyword under MIRAIT ONE Group Vision 2030 is change.
Change 1: People-centric management
Change 2: Acceleration of business growth
Change 3: "Top-class" profitability
Change 4: Data-based management
Change 5: Strengthen foundation for ESG management
Performance targets under new medium-term business plan
Resolution on share buyback
On May 13, 2022, MIRAIT Holdings Corp. announced a resolution on share buyback.
Details of share buyback
Type of shares to be acquired: MIRAIT Holdings Corp. common stock
Total number of shares to be acquired: Up to 1,350,000 shares (equal to 1.36% of total shares issued [excluding treasury shares])
Total cost of share acquisition: JPY2.0bn (upper limit)
Acquisition period: Between May 16, 2022 and September 30, 2022
Acquisition method: Market purchase on the Tokyo Stock Exchange
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Forecasts reflect most recent figures.
Full-year FY03/22 results (out May 13, 2022)
Overview
In FY03/22, orders received amounted to JPY521.3bn (+9.8% YoY). Excluding the construction contracts carried forward at Seibu Construction Co., Ltd.*, orders totaled JPY463.2bn (-2.5% YoY). Sales came to JPY470.4bn (+1.4% YoY), and construction contracts carried forward was JPY208.4bn (-29.0% YoY) or JPY150.3bn (-7.0% YoY) when excluding those of Seibu Construction. Operating profit was JPY32.8bn (+8.9% YoY), recurring profit reached JPY34.2bn (+7.6% YoY), and net income attributable to owners of the parent was JPY25.2bn (+4.0% YoY).
Achievement rate: At the conclusion of FY03/22, orders received had achieved 106.4% of the company’s full-year target (94.5% when excluding construction contracts carried over at Seibu Construction), while sales had reached 98.0%, operating profit 102.5%, recurring profit 101.9%, and net income 111.8%. Although sales slightly undershot the full-year estimate, orders and all profit items finished above target.
Orders received up 9.8% YoY (down 2.5%, excluding construction contracts carried forward at Seibu Construction): Orders received were down 6.6% YoY in the NTT business, down 5.8% in the Multi-carrier business, up 130.2% in the Environmental and Social Innovation business (up 16.5%, excluding impact of Seibu Construction), and down 1.9% in the ICT Solutions business.
Sales up 1.4% YoY: Sales increased 4.1% YoY in the NTT business and 8.1% in Multi-carrier business but fell 4.3% in the Environmental and Social Innovation business and 3.5% in the ICT Solutions businesses.
Operating profit up 8.9% YoY: The gross profit margin was 14.1% (+1.0pp YoY), and the SG&A-to-sales ratio was 7.1% (+0.5pp YoY). Operating profit margin came to 7.0% (+0.5pp YoY).
Net income up 4.0% YoY: The company recorded a JPY3.3bn gain on sales of investment securities (-JPY1.4bn YoY).
External environment
In its mainstay ICT engineering business, the company continued to observe short-term delays in delivery of construction materials and in the progress of some construction projects. However, overall, it expects an increase in mobile construction work due to the acceleration of base station development plans aimed at expanding services related to the 5th generation mobile communication system (5G). It also anticipates growth in demand for new ICT solutions stemming from expanded use of online services and from corporate digital transformation initiatives such as migration of on-premise systems to the cloud. In addition, it expects to see moves toward strengthening digital infrastructures that can support the Japanese government's "green growth strategy," which includes renewable energy policies for the achievement of a carbon-free society, as well as projects to achieve regional revitalization through area-oriented decarbonization efforts.
Company initiatives
As a “comprehensive engineering and service company,” MIRAIT aims to be a trusted corporate group that both establishes and protects social infrastructure (communications and energy) for the future while implementing measures targeting prevention of the COVID-19 pandemic. To this end, MIRAIT is conducting initiatives focused on improving the efficiency of business operation groupwide by facilitating workstyle reforms and promoting digital transformation. At the same time, the company endeavors to raise its corporate value and achieve sustainable growth.
In the NTT business, the company strove to expand sales by handling more optical fiber work arising from government-supported projects aimed at expanding advanced wireless telecommunication networks. It also sought to improve profitability by bolstering the efficiency of facility management operations.
In the Multi-carrier business, the company aimed for sales growth by handling more 5G and CATV-related work as well as projects for Rakuten Mobile. It also looked to enhance its technological strength and personnel base by stepping up efforts to foster multi-skilled engineers who can handle construction and maintenance work for both fixed line and mobile communication facilities.
In the Environmental and Social Innovation business, construction projects for large solar power plants decreased. The company focused on winning orders for electrical, lighting, and air conditioning work.
In the ICT Solutions business, the company sought to expand sales by taking on more data center and cloud-related projects, while also focusing on growth of the overseas (global) business led by the Lantrovision group. With a view to expanding the global business in the medium to long term, the company also decided to invest in LBS Digital Infrastructure Corp., which runs a telecommunications tower business in the Philippines.
By segment
Full-year company forecast for FY03/23
Overview
FY03/23 company forecast
The company forecast for FY03/23 calls for orders of JPY540.0bn (+3.6% YoY), sales of JPY540.0bn (+14.8% YoY), operating profit of JPY30.0bn (-8.5% YoY), recurring profit of JPY31.0bn (-9.2% YoY), net income attributable to owners of the parent of JPY20.0bn (-20.5% YoY), and an annual dividend of JPY60.00 per share (JPY55.00 in FY03/22).
Concern lingers over prolonged uncertainties in the business environment. Nonetheless, the company will work to expand new solution-based businesses including the renewable energy business (for example, solar power) targeting a carbon-free society, and construction projects associated with data centers and cloud systems. It will also seek to transform its business structure by strengthening inter-group collaboration. Full-year earnings contribution is expected from Seibu Construction, which was made a consolidated subsidiary in FY03/22.
Shareholder returns
The company's basic policy is to maintain stable and consistent dividend payment targeting a total return ratio of 30% or more, while taking its earnings results and cash position into consideration. Internal reserves will be used to strengthen the company's financial position and to develop businesses that can enhance its corporate value.
Annual dividend per share: JPY60.0 (up JPY5.0 YoY)
Share buyback: Up to 1,350,000 shares or JPY2.0bn (1.36% of total shares outstanding excluding treasury shares); acquisition period from May 16 to September 30, 2022
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Orders for merged companies include construction contracts carried forward at the time of each merger.
Note: Figures for YoY change in FY03/23 are comparisons with FY03/22 results that have been adjusted to reflect the new business classifications.
Long-term outlook
On May 17, 2022, the company unveiled its long-term vision, MIRAIT ONE Group Vision 2030, and its new medium-term business plans covering the years from FY03/23 through FY03/27.
MIRAIT ONE Group Vision 2030
MIRAIT ONE Group Vision 2030
Ahead of the transformational merger between MIRAIT Holdings Corp. and consolidated subsidiaries MIRAIT Corporation and MIRAIT Technologies Corporation to form MIRAIT ONE Group on July 1, 2022, the company redefined its raison d'être (purpose) and social mission, incorporating the aspirations of its 14,000 executives and employees. Dubbed MIRAIT ONE Group Vision 2030, the long-term vision looking out to 2030 is aimed at guiding the company's efforts as it works towards the creation of a corporate group that will better contribute to the resolution of various social issues in the area of social infrastructure (as broadly defined).
Overview of management strategy
With the group's strategic growth plans under the long-term vision calling for specific changes in five key areas, the keyword under MIRAIT ONE Group Vision 2030 is change.
Change 1: People-centric management
Change 2: Acceleration of business growth
Change 3: "Top-class" profitability
Change 4: Data-based management
Change 5: Strengthen foundation for ESG management
Performance targets under new medium-term business plan (FY03/23–FY03/27)
Reference: Medium-term management plan (three-year plan from FY03/20 to FY03/22)
Overview
On May 9, 2019, along with FY03/19 full-year results, MIRAIT released a new medium-term management plan spanning from FY03/20 to FY03/22.
The medium-term management plan calls for final-year (FY03/22) sales of JPY450.0bn (+119.7% versus FY03/19), operating profit of JPY27.0bn (+130.4% YoY), and ROE of 8% or more.
Targets met one year ahead of schedule in FY03/21
In FY03/21, the company posted sales of sales of JPY463.7bn (+5.1% YoY) and operating profit of JPY30.1bn (+37.0% YoY), reaching the medium-term plan targets one year and schedule. The company has not revised its medium-term plan targets, but for FY03/22, the last year of the plan, it initially forecasted sales of JPY470.0bn (+1.3% YoY), operating profit of JPY30.5bn (+1.2% YoY), recurring profit of JPY32.0bn (+0.8% YoY), and net income attributable to owners of the parent of JPY21.0bn (-13.2% YoY). The company lifted its initial FY03/22 forecasts on November 12, 2021 (see the Full-year company forecast for FY03/22 section of this report). Since June 2021, the company has been revamping its organizational structure under new management, and is considering new targets for FY03/23 onward. It thus sees FY03/22 as a bridging period.
Overview of key initiatives
There is no change to the company’s key medium-term plan initiatives in FY03/22. It plans to focus on the following.
The company aims to enhance its competitiveness in the market, increase sales, and improve profitability and efficiency amid a favorable environment including the arrival of the 5G era, progress with IoT, and capital spending in energy and social infrastructure.
The company expects OPM to drop to 5.0% in FY03/20 because of merging with three companies with a large NTT fixed-line business weighting, but aims to improve OPM to 6.0% in FY03/22 (the final year of the medium-term plan) by making the NTT business more efficient.
As well as gradually transferring construction know-how and resources to the three merged companies using the existing group as a benchmark, the company plans to expand sales of the ICT Solutions and Environmental & Social Innovation businesses by taking advantage of the three companies’ regional customer base.
The company seeks to transition from its Base Domains to Frontier Domains*2, targeting a 50:50 weighting in FY03/22 (see below).
Basic principles
The company created a new medium-term management plan to maximize its expanded business resources following the merger. The aim is to maximize merger synergies and drive further growth as the company accelerates its transformation into a comprehensive engineering and service company.
With changes looming in the business environment in which the company operates, the business models of its telecom carrier customers are changing. There are prospects for the provision of new services using 5G. Further, there are major changes in prospect in the business environment. When the IoT era is fully up and running, there will be mounting demands for new solutions such as cloud and drone utilization technologies, as well as acceleration of rebuilding social infrastructure put in place in the 1960s and 1970s and solutions to the labor shortage including advances in labor saving and automation as well as expansion of alternative energy facilities.
Shareholder returns policy
MIRAIT aims to maintain stable, long-term dividends. The company will determine the dividend amount targeting a total return ratio of 30% plus, taking earnings, capital position, and other factors into consideration. It will consider share buybacks as a way to reward shareholders with the goal of ROE of 8% plus.
Main strategies
Create new business opportunities
Help revitalize regional economies by leveraging deepened regional coverage resulting from mergers. The Tohoku and Chugoku areas have a high fixed-line telecom business weighting, but close relationships with customers enable business expansion that build on these relationships. The company plans to establish a structure for construction work nationwide.
Help to solve social issues by combining business categories and technologies*2. Harness ICT to improve the group’s productivity and streamline operational costs while winning business opportunities that arise due to a changing business environment.
Transition of business structure
Accelerate the transition of the company’s business structure from Base Domains to Frontier Domains*3 to achieve further growth, targeting a 50:50 weighting in FY03/22. The company will also pursue the shift to Frontier Domains for the three merged companies have a large fixed-line business weighting (i.e., Base Domains account for over 70% of sales) at the same time as progressing a transition in quality (i.e., prioritize profit).
Improve productivity and streamline operational costs
Stabilize operation rates of construction work by strengthening collaboration with partner firms
Share systems and centralize common business processes
Strengthen human resource base
The company believes that its human resource base is the driving force of productivity improvement. Its vision is to become an attractive, comprehensive engineering and service company that people find rewarding to work for, because it maximizes the organizational capability of teams and the motivation and abilities of each autonomous employee so that all can work with vitality in sound physical and mental health and be aware of their career development. The company says it will take time to foster human resources, which it considers to be its top long-term priority.
Promote ESG management
The company plans to make a contribution to Sustainable Development Goals (SDGs) through all its business activities, as well as taking a broader view of business risks and opportunities from an Environmental, Social and Governance (ESG) perspective and respond appropriately
Establish the MIRAIT group brand as one that meets customers’ expectations of security and trustworthiness through improvements in safety and quality
Its three priority themes are summarized below (see table below for specific challenges):
Capital policy
Maintain sound financial standing
Management mindful of capital cost
Share buybacks to attain ROE of over 8%
Transformation of business structure
Preparation for three-way reorganization/merger
Company establishes office to prepare for new group
The company accelerated the transformation of its business structure in response to changes in the business environment, for example by preparing for a three-way merger of the company and two of its consolidated subsidiaries (MIRAIT Corporation and MIRAIT Technologies Corporation; target date: early FY2022). In July 2021, the company set up an office to oversee preparations for the establishment of the new group, as work to develop the new merged entity got into full swing.
In April 2021, the company launched a single team organization in the solutions area. Now the solutions businesses of MIRAIT and MIRAIT Technologies collaborate on business strategies and planning. The company is also stepping up integration and collaboration including integrated office operation (sales and execution).
In July 2021, the company launched a single team organization in the global business area. By combining management of overseas subsidiaries, it aims to improve efficiency and integration, and also plans to strengthen and integrate business development functions.
In October 2021, the company plans to launch a single team organization in its Frontier Domains. By bringing together human resources, it aims to accelerate business innovation in areas such as 5G, digital twins*, energy management, and smart cities.
Aims of three-way merger
Nurture new areas such as solutions to become core businesses
Strengthen existing carrier business earnings structure
Strengthen management foundation
New merged entity
The company is considering adopting a company structure along business lines for the new merged entity. Each company would have enhanced management execution capabilities so would be able to operate in a speedy, flexible manner, and would aim to maximize sales and profit. In solutions, the company aims to boost marketing capabilities and expand business domains by combining MIRAIT and MIRAIT Technologies. In the carrier business, it aims to integrate the fixed and mobile business and gain efficiencies by winnowing out overlapping branches, and build a business operating structure close to regional customers. The company plans to establish companies in East Japan and West Japan respectively. Its plans to strengthen the management foundation by consolidating shared departments and streamlining overheads.
Changes in external environment
Arrival of the 5G era
Overview
The era of 5G (fifth generation)*4 of mobile communications characterized by enhanced mobile broadband, ultra-reliable and low latency communication, and massive machine-type communication kicked off in Japan with commercial services in March 2020. 5G is elemental technology essential to making IoT (all things being connected to the Internet) a reality.
In April 2019, the Ministry of Internal Affairs and Communications (MIC) allocated frequency bands for 5G to NTT Docomo, KDDI/Okinawa Cellular, SoftBank, and Rakuten Mobile*5. In March 2020, NTT Docomo, KDDI/Okinawa Cellular, and SoftBank began commercial 5G services, followed by Rakuten Mobile in September 2020.
Existing 4G frequency bands (700MHz, 1.7GHz, 3.4GHz, and 3.5GHz have been approved for 5G, and their use for 5G began in December 2020. Since the start of 2021, the Ministry of Internal Affairs and Communications approved additional use of the 1.7GHz band for 5G (excluding Tokyo, Nagoya, and Osaka), and is conducting technical studies on the 4.9GHz, 26GHz, and 40GHz bands, and hopes to make additional allocations by the end of the year.
Changes that 5G will bring
Key changes are data rates of over 10Gbps (maximum capacity: 100x versus 4G), low latency to 1ms or less (ultra-reliable and low latency communication; latency less than 1/10 of 4G-LTE), and a very large number of devices supported (1m devices per 1km2, or 100x versus 4G). To this end, 5G will utilize the following technologies: Massive MIMO, which deploys many tens of antennae; beam forming (forming radio wave beams in any desired direction); milliwave frequencies; waveforms and modulations for spectrum sharing technologies, wireless frameworks configured to achieve low latency; and core networks using software-defined networking.
Non-standalone heterogeneous networks
The above technologies are already in use in wireless technologies as part of conventional 4G technologies such as LTE and LTE-Advanced and maintains usage continuity with frequency bands used for 4G (non-standalone heterogeneous networks)*6.
C/U plane split
The C-plane handles control signals within a micro cell by using conventional frequencies for call processing, while the U-plane deals with high-volume data exchanged by users using milliwaves and other high frequencies for which it is easier to secure large bandwidth within small cells. This C/U plane split helps to ensure mobility and stable quality.
Network slicing
Network slicing is a virtualization technology that splits up network resources to provide dedicated virtual networks with functionality specific to the service or customer. Applying this method to core networks and wireless access networks makes it possible to satisfy the required conditions of 5G and adapt to services with different requirements in a flexible way, thereby providing an optimized network for each service.
Mobile edge computing
In mobile edge computing, servers that traditionally provide services in the cloud are positioned close to users. This reduces end-to-end latency.
By taking advantage of the features of the above technologies, 5G is expected to enable diverse services such as transmission of high-resolution 4K/8K video and VR/AR video, self-driving cars, remote medical care (including remote surgery that uses touch interface), remove operation of construction machinery, Industrial Internet of Things (IIoT) in factories, and remote operation of vending machines, surveillance cameras, and communication devices.
5G base station installation
On December 25, 2020, the Ministry of Internal Affairs and Communications released its Master Plan 3.0 on the Regional Development of ICT Infrastructure. A number of mobile operators flagged their intentions to spend about JPY2tn each over the 10 years from 2021 onward on 5G base stations*, so the ministry revised its Master Plan 2.0 (released in July 2020). Through the steady rollout of Master Plan 3.0, the ministry plans to significantly bring forward the nationwide rollout of 5G and optical fiber.
Under Master Plan 3.0, the ministry forecasts that there will be 280,000 5G base stations (including those for 4G) by end-FY03/24, an increase of 70,000 versus the plan for 210,000 base stations under Master Plan 2.0. This is four times the planned number of base stations (5G only) forecast at the time of the comparison review for frequency allocation conducted in 2019.
Effects of cell minimization on telecom construction
The way a radio wave is transmitted depends on its frequency (wavelength). Low frequency (long wave) radio waves can navigate around obstacles such as buildings and can travel far, and are not easily affected by rain. However, high frequency (short wave) radio waves travel in a straight line and tends to be reflected off buildings, which means they only travel short distances, as well as being vulnerable to rain and fog. However, high frequency radio waves allow high volume data transmission, because large bandwidth can be secured.
As explained above in the section on heterogeneous networks, lower-power base stations such as micro cells, which over a range of several hundred meters, and pico cells used within a single building are within the coverage of high-power macro cell base stations with a range of several kilometers. Depending on usage conditions, handsets can select which base station to connect to. A primary 5G Specified Base Station (equipped with ultra-fast networks using high-capacity optical fiber that connects to the core network and can support multiple secondary base stations) is installed in each “mesh” 10km square, and multiple secondary base stations and mini base stations are established around it to cover the whole mesh.
Because of the radio wave properties described above, the area covered by a single base stations in 4G (LTE and LTE-Advanced) micro cells is a 2–3km radius, whereas the area covered by 5G small cells is only a 100m radius. Thus, many more base stations are needed for 5G than for 4G. This means the number of construction projects per unit of time for telecom construction companies like MIRAIT is expected to increase, making it crucial for these companies to improve the efficiency of their operations. Work is likely to be performed on diverse locations including building walls, utility poles, lamp posts, and traffic signals.
5G mini base stations are expected to be installed on roofs and walls of medium-height buildings, windows, walls, and signs on lower buildings, and utility poles, lamp posts, and traffic signals*8. Base stations are usually placed on the roofs of buildings in urban areas with limited space to build communication towers, and many are already in place.
Frequency allocation and population coverage
Although frequency allocation is by auction in many countries, in Japan MIC holds a “beauty contest” for mobile carriers applying for allocation. Guidelines are published regarding Specified Base Stations (i.e., base stations that use specified frequencies as provided by the Radio Law). For example, for the 4G 700MHz frequency band, applicants had to attain population coverage of at least 80% by March 31, 2019. Mobile carriers’ 3.5GHz service rollout plans at end-March 2019 targeted population coverage of 55.5% (51.3% at end-June 2019) for NTT Docomo, 51.4% (30.3%) for KDDI/Okinawa Cellular, and 50.5% (34.6%) for SoftBank. For the 4G 3.4GHz band allocated to NTT Docomo and SoftBank and 1.7GHz band allocated to KDDI and Rakuten Mobile in April 2018, target coverage is 50% in five years’ time for 3.4GHz and 80% in eight years’ time for 1.7GHz. Thus, all mobile carriers must invest in infrastructure based on their capex plans.
GIGA School Concept
The GIGA School Concept calls for one tablet device per student and the creation of a high-speed, high-volume network to bring the whole system together. GIGA stands for Global and Innovation Gateway for All.
The Japanese government is moving forward with the GIGA School Concept, which calls for one device per student and the creation of a high-speed, high-volume network to bring the whole system together (a project headquarters was established in December 2019). The government’s 2019 supplementary budget included JPY231.8bn for the project (JPY129.6bn for work related to the network and JPY102.2bn for devices). This is an emergency measure implemented under the authority of the prime minister to help Japan escape its position as an underdeveloped country in terms of ICT education, since budgetary measures that rely on tax revenue allocated to local governments have had no discernible effect in the effort to get one computer into each pupil’s hands by 2020.
This latest move will facilitate provision of devices for one class out of every three at elementary and junior high schools nationwide by FY2022 (providing maximum assistance of JPY45,000 per computer). The goal is for every pupil to have a device by FY2023. The measure will also provide a high-speed, high-volume network.
In addition, the FY2020 supplemental budget plan includes ICT measures for emergencies, such as temporary school closures due to disasters or infectious diseases, as part of the Emergency Economic Measures to Cope with COVID-19 (Cabinet Decision on April 7, 2020). Approximately JPY229.2bn is earmarked for rapidly developing an environment that can ensure continued education for all children. JPY195.1bn is earmarked to accelerate the one device per pupil goal while JPY7.1bn was budgeted for development of a comprehensive network environment to provide service to all schools. Corrective measures were implemented in FY2019 to facilitate early realization of the one device per pupil objective and covered all 5th and 6th grade elementary school students and 1st year junior high school students. This has now been expanded to include 2nd and 3rd year junior high school students and 1st to 4th grade elementary school students (maximum budget per device is JPY45,000).
According to a survey conducted by the Ministry of Education, Culture, Sports, Science and Technology, as of end-March 2019, only 1.8mn computers were being used by 9.6mn elementary and junior high school students (18.5% penetration, or one computer per 5.4 students; excludes computers used by teachers). This would mean additional demand of 7.8mn computers to ultimately achieve the one device per student objective.
According to a survey conducted by the Ministry of Education, Culture, Sports, Science and Technology, as of end-March 2019, only 1.8mn computers were being used by 9.6mn elementary and junior high school students (18.5% penetration, or one computer per 5.4 students; excludes computers used by teachers). This would mean additional demand of 7.8mn computers to ultimately achieve the one device per student objective.
Business
Business description
he MIRAIT corporate group is one of three major telecommunications construction companies. The company was established in October 2010 through the integration of Daimei Telecom Engineering Corp., Commuture Corp., and Todentsu Corp.—companies involved in telecoms infrastructure construction for over half a century—under a holding company. In October 2012, the group businesses were restructured to improve operating efficiency and merged to form the current consolidated entity of Tokyo-based MIRAIT Corporation and Osaka-based MIRAIT Technologies Corporation under MIRAIT Holdings. In June 2016, the group also acquired Lantrovision (S) Ltd., which designs, constructs, and maintains LAN cables, primarily in Singapore. Furthermore, the group merged with TTK Co., Ltd. through an exchange of shares in October 2018, and with Solcom and Shikokutsuken through share exchanges in January 2019.
Main businesses
The company has four business categories: the NTT, Multi-carrier, Environmental and Social Innovation, and ICT Solutions. The NTT and Multi-carrier businesses serve the capital investment needs of legacy telecoms companies, and accounted for about 55% of consolidated sales in FY03/21. The company is thus trying to wean itself from a structure largely reliant on telecoms’ capex activities, and is aggressively pursuing non-telecoms services. As a result, the ratio of sales from non-telecoms services increased from about 29% in FY03/14 to 45% in FY03/21.
Figures may differ from company materials due to differences in rounding methods.
Overview of businesses follows.
NTT business (33.9% of sales in FY03/21; 35.4% of sales in FY03/20)
This business focuses on the construction, maintenance, and operation of fixed-line telecoms facilities for subsidiaries of Nippon Telegraph and Telephone Corporation (TSE Prime: 9432, NTT), namely, Nippon Telegraph and Telephone East Corporation (NTT East) and Nippon Telegraph and Telephone West Corporation (NTT West). The business’s main areas of operation are the Tokyo metropolitan area and the Kansai region. As shown below, the business spans the entire telecom infrastructure spectrum, from NTT’s offices to customers’ premises and all areas in between.
Outsourced operations related to transmission-line construction for IP networks: MIRAIT works with NTT to prepare, submit, and manage construction-application documents; installs and manages relay transmission and monitoring equipment; and conducts various operations related to transmission equipment.
Transmission-line construction on NTT premises: MIRAIT installs transmission equipment and builds power-supply facilities; connects optical fibers to other telecom operators’ facilities; decommissions old facilities; and augments transmission-equipment modules and packages.
Construction of outdoor facilities: The company constructs aerial lines and underground facilities (e.g., manholes, conduit equipment, and common ducts for telecoms and electrical wires).
Provision of network circuits to end users on customer premises: MIRAIT installs fiber optics terminals, sets up routers, and trenches for incoming lines for telecom operators.
Advanced Wireless Environment Development Promotion Project business: The company installs optical fiber to ready an advanced wireless environment suitable for 5G and IoT from telecommunications carriers to the entrances of wireless stations in geographically disadvantaged regions using government subsidies.
The core business of this segment is the installation of optical fiber and related work. The company also works on aging utility poles and conducts facility management (fault repair, line maintenance, and facility management).
Multi-carrier business (21.2% of sales in FY03/21; 22.0% of sales in FY03/20)
In this business, MIRAIT operates nationwide, covering everything from mobile telecommunications-related consulting to mobile network design, construction, conditioning, testing, and maintenance. The business also encompasses NCC fixed communications facilities and cable television construction.