■Overview of TOKAI Holdings <3167>

The company operates primarily in the "Energy and living-related business" and "telecom services" centered around LP gas in Shizuoka Prefecture, providing a one-stop service for all lifestyle-related services and deepening connections with customers, the surrounding region, society, and the global environment, aiming to contribute to people's rich lives, regional development, and environmental conservation, and to grow into a leading comprehensive living service company in japan.

The current business segments are disclosed in six categories: "Energy business", "telecom services", "CATV business", "building facilities real estate business", "Aqua business", and "Others". Looking at the revenue composition ratio by business segment for the fiscal year ending March 2024, the core "Energy business" accounts for 43.6%, "telecom services" 24.5%, and "CATV business" 15.4%, which totals over 80% of the entire revenue and shows no significant changes over the past five years.

1. Energy business

In the energy business, approximately 83% of the revenue comes from the LP gas business and about 17% from the city gas business. The main LP gas business is conducted by TOKAI Corporation, primarily selling to residential and industrial uses, with some wholesale sales as well. The primary service areas are centered on Shizuoka Prefecture and the Kanto region, but since 2015, the company has been gradually expanding into new areas such as southeastern Tohoku, Chubu/Tokai, China/Shikoku, and Kyushu, thereby increasing its customer base. As of the end of the first half of the fiscal year ending March 2025, the number of customers stands at 804,000, with increases seen in both existing and new areas. The share of new areas has risen from about 4% in the fiscal year ending March 2019 to approximately 13% recently. In terms of industry position, the company ranks third after Iwatani Corporation <8088> and Nippon Gas <8174> in direct sales. The market share is about 20% in its base Shizuoka Prefecture, taking the top position, and it holds just under 10% in the fiercely competitive Kanto region, making it second. The number of households using LP gas nationwide is approximately 21 million, resulting in just over a 3% national market share, but the strategy is to expand this share through ongoing geographic expansion and M&A initiatives.

※ The number of LP gas sales operators has decreased from about 0.021 million in 2012 to about 0.015 million in 2023.

In the city gas business, Tokai Gas Co., Ltd. sells city gas in Yaizu City, Fujieda City, and Shimada City in Shizuoka Prefecture and has been expanding its service area by acquiring city gas operations previously managed by local governments following the total liberalization of gas retail in April 2017. Specifically, it has acquired and operated city gas businesses since April 2019 in Shimonita Town, Gunma Prefecture, and from April 2020 in Nikaho City, Akita Prefecture. The number of customers in the city gas business stood at 74,000 as of the end of the first half of the fiscal year ending March 2025. There are 190 city gas operators nationwide (172 private, 18 public); aside from four major firms, most are small to medium-sized local operators, indicating a policy of considering M&A opportunities if they arise in the future.

2. telecom services

(Co., Ltd.) TOKAI Communications operates a communications business that offers ISP (Internet Service Provider) services, MVNO* services, and mobile services (mobile phone dealer business) for consumers, and provides telecom line services, datacenter services, cloud play, and system development for corporations. For the interim period ending in March 2025, the revenue composition shows that the consumer-oriented business accounts for approximately 41%, while the corporate-oriented business accounts for around 59%, indicating a rising trend in the ratio of corporate-oriented business in recent years, which also constitutes the majority of operating profit.

* MVNO (Mobile Virtual Network Operator): A service provider that offers services by borrowing wireless communication infrastructure like mobile phones from other companies.

The ISP business operates under two brands: "@T COM (At T Com)" covering a nationwide service area and "TOKAI Network Club (TNC)" serving Shizuoka Prefecture, holding about 20% market share in Shizuoka Prefecture. Additionally, since February 2015, it has received wholesale provision of fiber lines from NTT (nippon telegraph & telephone corp <9432>) and started offering a fiber collaboration service ("@T COM Hikari" and "TNC Hikari") combined with its own fiber internet connection service, as well as plans bundled with major mobile carrier services. From 2017, it also began selling affordable SIM/smartphone "LIBMO (Libmo)" utilizing MVNO. As of the end of the interim period in March 2025, the number of customers reached 387,000 for traditional ISP services, 378,000 for fiber collaboration services, and 78,000 for "LIBMO."

In the mobile business, as an agent for SoftBank <9434>, it operates 14 mobile shops primarily in Shizuoka Prefecture, along with 7 stores offering iPhone repair services branded as "iCracked Store." The number of customers as of the end of the interim period in March 2025 is 165,000, continuing a gradual decrease from the peak of 236,000 in March 2016.

3. CATV Business

The CATV business is gradually expanding its service area through M&A strategies, most recently grouping Okinawa Cable Network Co., Ltd. in October 2022. As of the end of the interim period in March 2025, it operates in one metropolitan area and seven prefectures: Shizuoka, Tokyo, Kanagawa, Chiba, Nagano, Okayama, Miyagi, and Okinawa (11 group companies). The number of customers is 920,000 for broadcast services and 403,000 for communications services, totaling 1,324,000 with a gradual increase trend. The number of contracts for domestic CATV services, including communications services, amounts to a total of 27.12 million (as of March 2023, among which multi-channel services account for 7.77 million, internet services for 10.62 million, and telephone services for 8.73 million), indicating a steady increase driven by internet services. In the industry, the J:COM (JCOM Co., Ltd.) group holds a share of just over 50% based on the number of viewing households, while the second place and below, including this company, have a share of only a few percent. Therefore, this company aims to expand its share through M&A in the future.

(Written by FISCO guest analyst, Jo Sato)