SoftBank beats estimates as Sprint bounces back to profit
tokyo — SoftBank Group Corp. reported quarterly profit that beat analyst estimates as US unit Sprint Corp. returned to profit for the first time in three years.
Operating profit was ¥479.3 billion ($4.3 billion) in the fiscal quarter ended June, the Tokyo-based company said in a statement Monday. That’s more than the ¥323.7 billion average of analysts’ projections compiled by Bloomberg. Sales came in at ¥2.19 trillion, matching predictions.
SoftBank’s founder Masayoshi Son has relied on earnings from Japanese wireless and telecom operations, while Sprint has struggled to return to profit and stem subscriber losses. Now Son has set his sights on a possible merger with Charter Communications Inc., the second-largest cable provider in the US. The billionaire is also in the process creating the $100 billion SoftBank Vision Fund with the Saudi Arabian government, Abu Dhabi investor Mubadala Development Co. and other backers to speed up investments in technology startups abroad.
“The focus now is on the Vision Fund and how the company plans to build out its technology portfolio,” Daisaku Masuno, an analyst at Nomura Holdings Inc., said prior to the earnings release.
SoftBank’s shares have climbed 16 per cent this year and closed at ¥9,023 on Monday. The Japanese wireless operator has a market value of about ¥9.9 trillion, while its public shareholdings are worth ¥17.1 trillion. Son has for years maintained that his company is undervalued, urging investors to see SoftBank as a “goose with more golden eggs in its belly.” Net income for the period was ¥5.5 billion, well below estimates, after SoftBank reported losses on derivatives related to a forward contract involving SoftBank’s investment in Alibaba Group Holding Ltd. of ¥257 billion.
Son has secured about $65 billion in financing for a possible offer for Charter, according to people familiar with the plan. Sprint is said to have resumed preliminary merger discussions with T-Mobile US Inc. people with knowledge of the matter said. Last week, Sprint chief executive officer Marcelo Claure said a decision on possible mergers is close at hand, lifting Sprint shares as much as 12 per cent.
“Sprint’s earnings are improving as planned and the company could conceivable go it alone,” Son said at an earnings briefing in Tokyo on Monday. “But, in order for the company to growth further, we are considering multiple consolidation options. The negotiations are proceeding apace and we should be able to arrive at a decision soon.” In the past six months, Softbank has invested in businesses ranging from ride sharing, co-working and robotics to agriculture, cancer detection and autonomous driving. At the company’s annual event for customers and suppliers last month, Son painted a picture of the future where satellite networks cover every inch of the Earth and a trillion devices connected to the internet disgorge data into the cloud where it is analysed by artificial intelligence. SoftBank and its companies will be there at every step of the way, the billionaire said.
SoftBank Vision Fund has already raised more than $93 billion in total commitments from the Public Investment Fund of Saudi Arabia, Apple Inc. and other large institutional backers, while SoftBank itself is contributing $28 billion. The fund will invest in cutting edge technologies from virtual reality to autonomous driving and the Internet of Things.
Even before the Vision Fund, Son has used cash from broadband and telecom operations in Japan to fund investments in businesses abroad. He was an early backer of Yahoo! Inc. and Alibaba. He spent $22 billion to acquire control of Sprint and last year bought chipmaker ARM Holdings Plc for $32 billion in the largest deal of his career.
“A major slice of the problem is the issue of whether SoftBank is a conglomerate, or else an investment vehicle,” Pelham Smithers, whose London-based firm offers equity research on Asian technology companies, wrote in a note to clients. — Bloomberg