Softbank could lose control of mobile unit if it fails to meet creditor targets

13 Feb 2007

According to The Financial Times, Japanese internet conglomerate Softbank Corp stands to lose control of the mobile business it acquired from Vodafone Group in 2006 if it fails to meet strict performance targets laid down by its creditors. The UK newspaper claims to have seen details of a 320-page loan document which says the management of Softbank Mobile will have to strike a balance between signing up new subscribers and simultaneously improving earnings. The strict profit targets will prevent the unit from waging an all-out price war to raise its customer base, but at the same time creditors are calling for a net two million increase in the subscriber base by 2019.

The stringent financial and operational targets reflect Softbank’s creditors’ long-term fears about its position in the domestic mobile market. The loan document lays down a set of ‘minimum thresholds’ that Softbank Mobile must fulfil to avoid creditors taking control of the company. These minimum targets include subscriber numbers that rise every quarter, from 15.435 million by 31 March 2007, to 17.634 million by September 2019, while Minimum Adjusted Ebitda has to rise from JPY100 billion in March 2007 – a level it has already passed – to JPY200 billion by September 2011. If Softbank Corp fails to meet its targets, the lending banks ‘will be entitled to dismiss and appoint the officers and the majority of the directors and exercise management control over the business and operations of Softbank Mobile’. According to Telegeography’s GlobalComms database, Softbank Mobile had 15.496 million subscribers at the end of December 2006, a market share of around 16%.

Japan, SoftBank Corp, SoftBank Group Corp, Vodafone Group