F-1/A: Center Mobile Eyes Nasdaq Listing, Franchising Expansion in Competitive Telecom Market

Center Mobile Co., Ltd. is pursuing an initial public offering to fuel expansion in mobile connectivity, new ventures, and increased brand visibility in Japan's competitive telecom landscape.

Summary

• Center Mobile Co., Ltd., a Japanese mobile connectivity and wireless communications service provider, is seeking to list its American Depositary Shares (ADSs) on the Nasdaq Capital Market.
• The company operates as a Mobile Virtual Network Operator (MVNO), leasing network infrastructure from NTT Docomo through FreeBit Co., Ltd.
• Center Mobile offers 4G LTE services and an innovative business model where customers can reduce monthly fees by watching advertisements on its PLAIO app.
• The company also operates an Internet Business and an Outsourcing Business through its subsidiary, Pay Storage.
• Center Mobile plans to expand into the water dispenser and original smartphone markets.
• For the fiscal year ended May 31, 2024, Center Mobile reported total revenue of JPY1,583,214 thousand (approximately $10,072 thousand) and net income of JPY40,278 thousand (approximately $256 thousand).
• The company intends to use the net proceeds from the IPO to develop and expand its water dispenser and original smartphone businesses, and to expand its existing businesses.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the company is pursuing growth strategies and expanding into new markets, it also faces significant risks and challenges, and its revenue and net income decreased during the fiscal year ended May 31, 2024.

Positives

• The company has an innovative business model that allows customers to lower monthly fees by watching ads on the PLAIO app.
• The company plans to expand into the water dispenser and original smartphone markets, leveraging big data technologies for targeted advertising.
• The company has established nationwide retail channels in Japan, consisting of two directly-operated stores, 36 franchise stores, 15 distributors, and five OEM Partners.
• The company's Outsourcing Business provides a more stable working environment and conditions for job seekers, which benefits the company in recruiting more talented and competent personnel to appeal to more corporate clients.

Negatives

• The company's revenue from mobile network services decreased by JPY251,642 thousand (approximately $1,601 thousand) during the fiscal year ended May 31, 2024.
• The company's revenue from advertising decreased by JPY4,468 thousand (approximately $28 thousand) during the fiscal year ended May 31, 2024.
• The company's revenue from travel business decreased by JPY87,658 thousand (approximately $558 thousand) during the fiscal year ended May 31, 2024.
• The company is dependent on dispatch fees paid by PayPay Corporation, which accounted for 25.1% of its total Outsourcing Business revenue during the fiscal year ended May 31, 2024.

Risks

• The company's dependence on MVNEs, their MNOs, and other third-party service providers could prevent the company from continuously providing its services to its customers.
• The company's ability to provide travel plans at competitive prices is crucial to the success of its Travel Business.
• The company relies greatly on FourM for showing advertisements to its customers through its PLAIO application and collecting advertising revenue under contractual terms.
• The company has a limited operating history and faces significant challenges and will incur substantial expenses as it builds its capabilities.
• The company operates in highly competitive industries across its SIM Card Business, Internet Business, and Outsourcing Business and Travel Business.
• The company's business depends on a strong brand recognition, and if the company fails to respond to customer requirements or is not able to maintain and enhance its brand, its business and results of operations may be harmed.
• The company's business is dependent on its ability to expand its services across its SIM Card Business, Internet Business, and Outsourcing Business and Travel Business.
• If the company fails to keep its strengths, such as keeping SIM card service prices competitive and attractive, and providing high-quality internet services, its profitability will suffer.
• The loss of key personnel could have a material adverse effect on the company's business.
• If the company fails to maintain and increase its retail channels, its business, financial condition, and results of operations could be materially and adversely affected.
• The company's earnings depend substantially on the success of its franchise stores and OEM Partners, and the company may be harmed by actions taken by its franchise stores or OEM Partners, or employees of its franchise stores and OEM Partners, which are outside of its control.
• The company's directly-operated stores, franchise stores, distributors, and OEM Partners are all located in Japan; therefore its current business and future growth could be materially and adversely affected if the company experiences a decline in customers in Japan.
• Privacy concerns and privacy laws and regulations may reduce the effectiveness of the company's products and services and could adversely affect its business.
• If the company fails to keep, manage, or properly use customers personal data, it could be subject to lawsuits, incur expenses associated with its server management system, or suffer damages to its reputation.
• If the company or any franchise stores fails to attract, train, or retain qualified management and sales personnel in physical stores, its business and future growth may be materially and adversely affected.
• The company's investment in the water dispenser business and the original smartphones business may not produce the returns it expects and may adversely affect its results of operations.
• The company may not be able to successfully implement its business and operating strategies.
• If the company fails to keep up with the rapid development changes in its industry, its services may become obsolete, and it may lose customers.
• The company requires a significant amount of cash to fund its business expansion; if it cannot obtain additional capital on terms satisfactory to it when it needs it, its growth prospects and future profitability may be materially and adversely affected.
• Regulatory matters and new legislation could negatively impact the company's ability to conduct its business.
• The company faces various cyber-security risks which, if not adequately addressed, could have an adverse effect on its business.
• The company relies on its relationships with certain business partners to develop and manufacture water dispensers and original smartphones. If these relationships were to be impaired, or if one of its business partners were unable to supply sufficient products to keep pace with its growth plans, it may not be able to continue to meet its current requirements and new business expansion in a timely manner, which could have a material adverse effect on business.
• The company's businesses depend on using and protecting its intellectual property rights and on not infringing the intellectual property rights of others.
• The success of the company's SIM Card Business expansion and its innovative business model development relies on its ongoing and future patent applications of big data technologies, which, if unsuccessful or delayed, could materially and adversely affect its business, financial condition, and results of operations.
• The company is subject to credit risk with respect to its customers.
• If the company is unable to conduct its marketing activities cost-effectively, its results of operations and financial condition could be materially and adversely affected.
• If the company fails to effectively implement its hiring policies in its Outsourcing Business, it may not be able to attract more job seekers and keep a stable pool of competent and well-trained workers, which could materially and adversely affect its business, financial condition, and results of operations.
• The success of the company's Outsourcing Business depends on its ability to maintain its professional reputation.
• A significant portion of the company's Outsourcing Business revenue is generated by dispatch fees paid by PayPay Corporation a Japanese mobile payment app operating company. If its relationship with it is impaired and it is unable to engage new corporate customers to replace it, its business, financial condition, and results of operations would be materially and adversely affected.
• The company has no commercial insurance coverage.
• Public health epidemics or outbreaks, such as the COVID-19 pandemic, and natural disasters, such as a tsunami, could adversely impact the company's business.
• The company's compliance and risk management programs might not be effective and may result in outcomes that could adversely affect its reputation, financial condition, and results of operations.
• General economic, political, and market conditions may have an adverse impact on the company's operating performance, results of operations and cash flow.
• The company is subject to litigation or administrative proceedings, which, if adversely determined, could cause it to incur substantial losses.
• The company intends to explore acquisitions, other investments, and strategic alliances. It may not be successful in identifying opportunities or in integrating the acquired businesses. Any such transaction may not produce the results it anticipates, which could adversely affect its business.

Future Outlook

The company intends to expand into the fields of a water dispenser business and to develop its original smartphones.

Industry Context

The document indicates that the MVNO market in Japan is highly competitive and fragmented. The company is competing with more than 30 companies that provide similar monthly plans for mobile connectivity and wireless communications services. The staffing agency market in Japan is also highly competitive and fragmented.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards.
• The document mentions that the company is competing with major MVNOs, some of which are highly integrated service providers that are directly operated by MNOs or MVNEs.
• The document also mentions that the company is competing with more than 3,000 staffing agencies in Osaka prefecture.

Legal Proceedings

• On March 29, 2023, the company received administrative sanctions from the Japan Consumer Affairs Agency for violating regulations on multilevel marketing transactions under the Specified Commercial Transactions Act.

Related Party Transactions

• On June 10, 2022, the company executed a loan agreement with Mr. Shota Matsuyama, the founder of Pay Storage.
• On April 15, 2024, the company transferred its one treasury share to Mr. Tatsuya Nakagoshi for the consideration of JPY4,439,730.
• On May 31, 2022, the company lent Tatsuya Nakagoshi JPY8,562 thousand which Tatsuya Nakagoshi accepted.
• On May 31, 2023, the company lent Tatsuya Nakagoshi JPY29,090 thousand, which Tatsuya Nakagoshi accepted.
• On May 31, 2024, the company lent Tatsuya Nakagoshi JPY3,324 thousand, which Tatsuya Nakagoshi accepted.

Stakeholder Impact

• The company's performance and future plans will impact shareholders, employees, customers, and business partners.
• The company's expansion into new markets and development of new products and services could create new opportunities for employees and business partners.
• The company's ability to provide competitive prices and high-quality services will benefit customers.
• The company's compliance with laws and regulations will protect the interests of all stakeholders.

Next Steps

• The company plans to list its American Depositary Shares (ADSs) on the Nasdaq Capital Market.
• The company intends to expand into the fields of a water dispenser business and to develop its original smartphones.
• The company intends to continue to grow its SIM Card Business and further develop its innovative business model by using its ongoing patent applications related to big data technologies.

Key Dates

Keywords

Mobile Connectivity, Wireless Communications, MVNO, PLAIO, Advertising Revenue, Outsourcing, Travel Business, IPO, Nasdaq, Japan