Bloomberg News

SoftBank Profit Slumps on Alibaba Charge, User Slowdown

August 08, 2014

Softbank CEO Masayoshi Son

Masayoshi Son, chairman and chief executive officer of SoftBank Corp. Photographer: Kiyoshi Ota/Bloomberg

SoftBank Corp. (9984), the Japanese wireless carrier led by Masayoshi Son, posted a 68 percent drop in first-quarter profit after booking an accounting charge from its stake in Alibaba Group Holding Ltd. and as subscriber growth slowed.

Net income fell to 77.6 billion yen ($763 million) in the three months ended June from 244.4 billion yen a year earlier, which included a one-time gain, the Tokyo-based company said today. That was the biggest profit drop since a loss in the March quarter of 2009, according to data compiled by Bloomberg.

SoftBank booked a 63 billion yen loss from associates as its Alibaba convertible preference shares (BABA:US)were treated as a liability under accounting rules ahead of the Chinese e-commerce operator’s initial public offering. SoftBank, which is trying to revive Sprint Corp. (S:US) in the U.S., is getting squeezed in Japan as rebates to lure customers are cut and larger rival NTT Docomo Inc. (9437) adds discounted calling plans.

“Domestic competition among mobile carriers is fierce but I don’t think it will get much worse,” said Kazuyuki Terao, Tokyo-based chief investment officer of Allianz Global Investors Japan Co.

SoftBank’s German-traded stock fell as much as 4.5 percent. Shares of SoftBank fell 3.4 percent to 6,801 yen in Tokyo before the earnings were announced.

Sprint, acquired by SoftBank in 2013, is struggling to retain users as the company is said to have scrapped plans to bid for smaller competitor T-Mobile US Inc.

Sprint Plans

Sprint ended talks with T-Mobile because regulatory concerns outweighed the potential benefits of combining the third- and fourth-largest U.S. wireless providers, a person familiar with the talks said. That means Overland Park, Kansas-based Sprint, which SoftBank bought for $22 billion last year, has to find another way to win users and compete with Verizon Communications Inc. (VZ:US) and AT&T Inc. (T:US)

The company is discussing new pricing plans in the U.S., Son said today. The billionaire declined to comment on T-Mobile at a briefing in Tokyo after the earnings.

“The key point from now on is how Son will improve its U.S. business,” said Satoru Kikuchi, an analyst at SMBC Nikko Securities Inc. in Tokyo. “I think it was good that he did not use up his limited resources and money in T-Mobile.”

Sprint named Marcelo Claure, the 43-year-old founder of mobile-phone distributor Brightstar Corp., as its chief executive officer, according to an Aug. 6 statement. SoftBank bought a controlling stake in Brightstar last year.

Slowing Growth

Claure this week said he will look at Sprint’s costs “extensively” and the company must continue to improve its network.

SoftBank’s first-quarter sales were 1.99 trillion yen while operating profit fell 16 percent to 337.6 billion yen, SoftBank said. The company maintained its forecast for annual operating income of 1 trillion yen excluding one-time items.

SoftBank’s customer growth has slowed from a year earlier. The company, including its Ymobile unit, added 548,000 net users in Japan, according to the statement, compared with 947,000 a year ago. NTT Docomo added 461,000 new customers, which is more than five times the pace of the year earlier.

SoftBank, founded in 1981, has stakes in more than 1,300 companies, including more than 30 percent of Alibaba. The Hangzhou-based company is headed toward a U.S. IPO and is valued at $187 billion, according to the average of analyst estimates.

Alibaba Stake

The Alibaba preference shares will convert to ordinary stock once the IPO is completed and the company will recognize gain in the future, SoftBank said today.

SoftBank’s first-quarter results a year ago included a 150 billion-yen gain from consolidating GungHo Online Entertainment Inc.

SoftBank has concentrated on acquisitions that provide content for wireless operations, including adding control of Finnish gamemaker SuperCell Oy for $1.5 billion, as it seeks growth amid a declining population at home.

The company will seek Internet and telecommunications opportunities globally, Son said today.

To contact the reporters on this story: Takashi Amano in Tokyo at tamano6@bloomberg.net; Grace Huang in Tokyo at xhuang66@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Robert Fenner, Aaron Clark


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Companies Mentioned

  • BABA
    (Alibaba Group Holding Ltd)
    • $105.95 USD
    • 0.00
    • 0.0%
  • S
    (Sprint Corp)
    • $4.34 USD
    • 0.15
    • 3.46%
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