SoftBank Group Corp net income soars 36%, partly boosted by gains from Vision Fund

13 May 2019

Japanese telecoms carrier to technology conglomerate SoftBank Group Corp has published its financial results for the twelve months ended 31 March 2019, with net profits surging 35.8% year-on-year to JPY1.41 trillion (USD12.8 billion) from JPY1.04 trillion, partly aided by gains from SoftBank Vision Fund, the subsidiary set up to specialise in growth capital and start-up investments. The Masayoshi Son-led carrier said that full-year turnover rose 4.8% to JPY9.60 trillion from JPY9.16 trillion, mainly attributable to a JPY2.05 trillion annualised increase in dividends from subsidiaries and associates, while operating income ballooned to JPY1.69 trillion from JPY384.63 billion, with operating income from SoftBank Vision Fund and Delta Fund contributing JPY1.26 trillion.

Commenting on the contribution of its Vision Fund, Chief Executive Masayoshi Son said the Tokyo-based company intends to establish a second Vision Fund ‘of about the same scale as the first one, counting new investors as well as previous ones’, which will be announced soon. The exact amount, date and structure of the fund are still undecided, he said, adding that SoftBank will continue to invest in AI and ‘other technologies that can enhance businesses like ride-sharing and medical services by anticipating demand or spotting cancer in very early stages’.

The Group’s SoftBank Segment reported full-year turnover of JPY3.75 trillion (up 3.8%), segment income of JPY725.14 billion (up 5.9%) and adjusted EBITDA of JPY1.21 trillion (up 1.1%), as the cumulative number of smartphone subscribers with the three brands – SoftBank, Y!mobile, and LINE MOBILE – increased 1.95 million from the previous fiscal year-end, to 22.08 million, and the cumulative number of subscribers to SoftBank Hikari, a fibre-optic service, increased 940,000 from the previous fiscal year-end, to 5.92 million. The Sprint (US) Segment, meanwhile, booked net sales of JPY3.73 trillion in the year to 31 March 2019, up from JPY3.60 trillion, with segment income recorded at JPY280.30 billion and adjusted EBITDA of JPY1.41 trillion (up 15.1%). Softbank Group Corp noted that ‘Sprint is working to expand its net sales by increasing the number of post-paid and prepaid subscribers and stabilising its ARPU. To achieve this goal, Sprint has continued its effort to further improve network quality and increase customer value by leveraging its ample spectrum holdings. In the fiscal year, Sprint expects to further increase network cash capital expenditures to improve its network quality. At the same time, Sprint continues its efforts to enhance profitability by further improving operational efficiency.’ Furthermore, on 29 April 2018 Sprint and T-Mobile US entered into a definitive agreement to merge in an all-stock transaction that is expected to receive federal regulatory approval in the first half of 2019.

In its financial report, SoftBank Group Corp also confirmed that on 8 May 2019 Yahoo Japan Corp decided to issue more than 1.51 trillion new shares worth JPY456.5 billion to the group’s SoftBank Corp unit, through a third-party allotment, of which ‘SoftBank Corp resolved to purchase the entire shares’. Yahoo Japan Corp also resolved to implement a tender offer for its own shares between 9 May and 5 June (the ‘Tender Offer’), and SoftBank Group Corp determined to accept the Tender Offer and tender its entire holding of 1,834,377,600 common shares (equivalent to JPY526.5 billion) of Yahoo Japan Corp, held by its wholly owned subsidiary SoftBank Group Japan Corporation (SBGJ).

The Group’s report confirms: ‘In the event that SoftBank Corp purchases the shares of Yahoo Japan Corporation through the Third-Party Allotment, and Yahoo Japan Corp purchases all of the shares to be tendered by SBGJ in the Tender Offer (collectively, the ‘Transactions’), the Company’s ownership in common shares of Yahoo Japan Corp will be 44.64% (all of which are indirect holdings through SoftBank Corp), compared with 48.16% (all of which are indirect holdings through subsidiaries, including SoftBank Corp’s shareholding of 12.08%) as of the fiscal year-end. As a result of the Transactions, Yahoo Japan Corp is expected to become a subsidiary of SoftBank Corp, which will be deemed to effectively control the company.

Less positively, however, SoftBank Group Corp’s market valuation dipped USD9 billion, as its share price tumbled in the wake of its initial public offer (IPO) of Uber, which was rated a ‘flop’ with shares sliding on the first day of trading. Uber opened at USD42, or 6.7% below its USD45 IPO price. Shortly after, it slid to USD41.06. While the company briefly reclaimed almost all its losses by early afternoon, the comeback reportedly proved short-lived.

Japan, SoftBank Corp, SoftBank Group Corp, Sprint Corporation (now part of T-Mobile US)