SoftBank Group Corp. founder Masayoshi Son is starting to reap the benefits of his enormous technology investments.
SoftBank reported second-quarter profit that far exceeded the highest analyst estimate largely because of multi-billion dollar gains on a handful of his many deals. Operating profit rose to 706 billion yen ($6.2 billion) in the three months ended September, compared with the 373 billion yen average of analysts’ estimates compiled by Bloomberg.
Son has been remaking SoftBank from primarily a telecommunications operator into a technology investment firm with his $100 billion Vision Fund. Tech investments contributed 393 billion yen to profit in the quarter, more than the 313 billion in all of the other businesses combined. The company cited increased valuations of India’s online hotel startup OYO Rooms and graphics card maker Nvidia Corp. SoftBank’s stake in Oyo has doubled in value to about $200 million since July 2015, while the shares of Nvidia rose 19 percent last quarter.
SoftBank shares climbed 29 percent from the start of the year through their peak in late September, but have since given up all of those gains amid negative news and a decline in technology stocks.
The results may be overshadowed by concerns over the listing of SoftBank’s domestic telecom operations and the company’s relationship with Saudi Arabia. The company may have to revise its plan to raise 3 trillion yen via the mobile unit’s IPO next month after rival NTT Docomo Inc. said it will comply with government pressure to cut rates. Separately, the murder of government critic Jamal Khashoggi by Saudi Arabia’s agents has triggered an international backlash, raising questions about SoftBank’s close ties to the kingdom. Son will have a chance to address the issues at a briefing in Tokyo today.
“Even more than the actual earnings numbers, investors want to hear from Son himself,” Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co., said ahead of the earnings announcement. “The most pressing question is how SoftBank plans to respond to the issue of lowering phone rates at home. They will also want to know if there are any changes in how the Vision Fund will operate in the future.”
Son’s close ties to Saudi Crown Prince Mohammed bin Salman helped secure a $45 billion contribution to the Vision Fund from the country’s sovereign wealth fund. Last month, Son flew to Riyadh to meet with the crown prince, but chose not to attend an investment conference that was shunned by many business leaders after the news of Khashoggi’s murder broke.
SoftBank’s domestic telecom IPO has the potential to be the largest such offering ever — with about 30 percent of the equity to be listed on the Tokyo Stock Exchange on Dec. 19, people with knowledge of the matter said last month. But the plans have come into question after Docomo, Japan’s biggest mobile carrier, said it may cut rates 40 percent and “return” 400 billion yen to customers. That sparked a sell-off among the country’s three major wireless operators, which lost a combined $34 billion the day following the announcement.
Sprint last week posted a surprise net income of $196 million and raised its full-year profit guidance. SoftBank is in the process of selling Sprint to T-Mobile US Inc., a $26.5 billion takeover that would combine the No. 3 and No. 4 wireless providers in the U.S. Despite the upbeat earnings, the Overland Park, Kansas-based company has argued that without the T-Mobile deal, it faces dire financial conditions.
The post SoftBank profit soars as Son’s technology bets begin to pay off appeared first on DealStreetAsia.
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