Japan's SoftBank slashes profit target, costly Sprint purchase weighs
By Teppei Kasai
TOKYO (Reuters) - Fast-growing Japanese telecom firm SoftBank Corp 9984.T sliced the best part of $1 billion off its annual profit forecast as the Sprint Corp (S.N: Quote) U.S. carrier it bought last year continues to lose customers in droves, with no quick fix in sight.
In a reality check for Chief Executive Masayoshi Son as he seeks to make SoftBank a global mobile media powerhouse, the firm said on Tuesday its second-quarter operating profit fell 23 percent. With the yen sliding and U.S. borrowing costs seen rising, Son may have to pay higher prices if he is to keep buying assets to offset SoftBank's sluggish domestic market.
SoftBank said Sprint's troubles mean it now expects an operating profit of 900 billion yen ($7.9 billion) in the year through March 2015, down from the 1 trillion yen it previously estimated. Sprint is working though a painful revamping of its network, causing a subscriber exodus, and on Monday said it will cut 2,000 jobs after several quarters of losses.
"Sprint's battle will be long and tough, and it's not something that can be fixed in a short time," SoftBank's Son told reporters in Tokyo. SoftBank bought the number three U.S. mobile carrier last year for $22 billion as part of a drive to expand outside Japan that's included investments across Asia.
"Along with cost cuts, we want to increase prime customers, not sub-prime customers, and we are already seeing things turn better," Son said, saying Sprint's focus is on long-term business rather than short-term, stop-gap fixes.
With scant prospects for major growth in Japan's saturated but sluggish domestic market, Son has led the cash-rich company on a string of high-profile acquisitions and investments in telecom and Internet-related businesses, helped by low interest rates globally and a comparatively strong yen.
Son is Japan's richest man through his near-20 percent stake in SoftBank, the country's third-biggest mobile carrier by subscriber numbers and now worth about $85 billion by market value.
As well as being the largest investor in recently listed Chinese e-commerce giant Alibaba Group Holding Ltd (BABA.N: Quote), SoftBank has plans to invest $10 billion in India's potentially huge but under-developed online retail market. Continued...