SoftBank’s Son aims to expand in United States

SoftBank’s Masayoshi Son said he wants to improve wireless connection speeds and lower monthly bills for U.S. customers as he pursues the acquisition of T-Mobile US.

At SoftBank’s annual shareholder meeting today, the billionaire chairman said he wants to expand in the United States because its population growth and gross domestic product both exceed Japan’s. Son, whose company paid $22 billion for Sprint last year and is the largest investor in Alibaba Group, said he believes the U.S. wireless industry is “one of the least satisfactory” in the world.

“I’m really determined to bring about better service at a lower price in the United States,” Son said. “We could inspire other carriers in the United States.”

Investors are focused on a potential bid by Sprint for T-Mobile because it would boost SoftBank’s growth prospects as competition for wireless subscribers in Japan intensifies. SoftBank, the nation’s third-largest carrier, faces slowing business as customers cut spending on voice services and shift to cheaper calling plans.

“The stock market wants Son to explain the development of his business and its growth strategy,” said Satoru Kikuchi, an analyst at SMBC Nikko Securities in Tokyo. “If Sprint acquires T-Mobile, there is concern about the financial burden of the deal and costs to upgrade networks.”

SoftBank shares rose 0.5 percent to 7,828 yen ($76) as of 11:02 a.m. in Tokyo. The stock has lost 15 percent this year, compared with a 2.3 percent decline in the benchmark Topix index. Sprint fell 0.7 percent to $8.46 on Thursday.

SoftBank forecast operating profit, or sales minus the cost of goods sold and administrative expenses, will total 1 trillion yen ($9.9 billion) in the year ending March 31, the company said on May 7. That would be a decrease of about 8 percent from the year before, and compares with the 1.1 trillion-yen average of 14 analyst estimates at the time compiled by Bloomberg.

Profit from the year ended in March included one-time gains from Willcom and Gungho Online Entertainment.

The number of subscribers departing SoftBank rose, and average revenue per user fell 2.2 percent to the lowest in at least eight quarters as the carrier sold more devices with cheaper plans and customers made fewer calls on its network, the company said.

“If you think of Japan, the mobile phone business is saturated,” said Edwin Merner, president of Atlantis Investment Research in Tokyo. “To keep going they all have to discount, they have to offer more for less, and that means less profits.”

SoftBank last year paid $22 billion to expand in the United States with Overland, Kansas-based Sprint, which in April posted its 25th loss in 26 quarters. The company intends to spend $16 billion over two years upgrading its U.S. network in an effort to close the gap with market leaders Verizon Wireless and AT&T.

Sprint is nearing an agreement on the price, capital structure and termination fee for an acquisition of T-Mobile that could value the wireless carrier at almost $40 a share, people with knowledge of the matter have said. An agreement could be announced as soon as next month, the people said.

Deutsche Telekom AG, based in Bonn, Germany, owns about two-thirds of T-Mobile, and there are concerns by investors that Son may borrow too much money to complete the deal.

“Before they buy T-Mobile they should sell part of Alibaba or pay back some debt so they don’t carry too heavy a level of debt,” said Cedric Araud, a fund manager at CapitalatWork Foyer Group SA in Luxembourg, which holds SoftBank shares. “First they should focus on making Sprint more profitable.”

Son, 56, has argued that as technology converges, a new market for Internet services is emerging in which AT&T, Verizon and Comcast are the three giants. He views a combined Sprint and T-Mobile as a counterweight, able to offer wireless high-speed Internet to compete with phone and cable modems.

SoftBank owns stakes in more than 1,000 Internet operations, including Alibaba, and stands to benefit when China’s largest online retailer goes public in what may be the largest U.S. initial public offering ever. Alibaba’s market value is estimated by analysts at $168 billion, according to data compiled by Bloomberg.

At that valuation, SoftBank’s stake of more than 30 percent in Alibaba is worth about $58 billion, assuming those shares translate into the same-sized holding in the listed company and there are no conditions on their ownership. The stake started as part of a $20 million investment in 2000.

SoftBank won’t sell any of its shares in the IPO, Son said in May.

SoftBank, founded in 1981, has made almost 100 purchases since 2000, according to data compiled by Bloomberg. The company also owns stakes in Yahoo Japan and Supercell Oy.

Son’s deals have helped make him the second-richest person in Japan with a net worth of $15.7 billion, according to the Bloomberg Billionaires Index.

Bloomberg