KDDI Corp said it expects to take an estimated 246 billion yen charge, equivalent to roughly $1.6 billion, after a special investigation confirmed that fictitious revenue had been recorded in the advertising agency business at two of its subsidiaries. The telecom group identified improper transactions affecting revenue figures at Biglobe Inc. and G-Plan Inc., and the development prompted a sharp market reaction on Monday.
Shares of KDDI plunged as much as 10% to 2,512.0 yen, marking the stock’s lowest level since early November. By 04:08 GMT the shares were trading 8.8% lower at 2,554.5 yen.
The company said a special investigation committee is examining the matter and has confirmed recordings of fictitious revenue tied to the advertising agency side of the business. Because the probe uncovered these improper entries, KDDI announced it will revise its accounting and adjust reported figures accordingly.
In light of the ongoing inquiry, KDDI postponed the release of its third-quarter financial results. The firm stated it will provide updated financials by the end of March once the investigation has been completed. Management also cautioned that the estimated financial impact could change as the review continues.
The affected subsidiaries named by KDDI are Biglobe Inc. and G-Plan Inc., where suspicious revenue figures were identified. The company’s statement tied the irregularities specifically to its advertising business and indicated the need for accounting revisions to correct previously recorded sales.
Investors reacted swiftly to the announcement, reflected in the sizable intraday decline in KDDI’s share price. The company’s decision to delay earnings disclosure until the probe concludes will leave a period of increased uncertainty as the market awaits revised third-quarter figures and any further updates to the estimated financial impact.
Until the investigation is finalized, KDDI said it may adjust the reported financial impact from the initially estimated 246 billion yen figure. The special investigation committee’s findings to date remain the basis for the company’s current assessment.
Note: The company provided the estimated charge amount, the names of the subsidiaries under review, the timing for updated results, and recent share-price movements.