SoftBank Corp., the Japanese wireless carrier bidding for control of Sprint Nextel Corp., forecast record operating income as acquisitions and new subscribers using Apple Inc.’s iPhone stoke earnings.
Billionaire President Masayoshi Son said SoftBank doesn’t need to raise its $20 billion Sprint offer, which he called superior to a subsequent higher proposal by Dish Network Corp. The Tokyo-based company’s bid is worth 21 percent more after including break fees and costs of the rival offer, he said.
SoftBank has posted higher subscriber growth than larger Japanese rivals in the past 12 months as it bought local competitor eAccess Ltd. to meet bandwidth demand for smartphones. The company targeted Overland Park, Kansas-based Sprint to add U.S. growth and reduce its reliance on a shrinking home market.
“SoftBank’s domestic telecommunications business has entered a phase of stable profit growth,” Hitoshi Hayakawa, an analyst at Credit Suisse Group AG who recommends buying the stock, said in a report after the announcement. “Both earnings and the share price are set to be increasingly U.S. driven.”
SoftBank rose 1.2 percent to close at 4,825 yen in Tokyo trading before the announcement, widening its gain this year to 54 percent. Japan’s benchmark Nikkei 225 Stock Average has added 33 percent this year. Shares rose 2.4 percent to 37.85 euros in German trading.
Operating profit, or sales minus the cost of goods sold and administrative expenses, for SoftBank’s domestic businesses probably will exceed 1 trillion yen ($10.2 billion) in the year started April 1, up from 745 billion yen a year earlier, the company said in a statement today.
The forecast for Japan’s No. 3 wireless operator compares with the 914 billion-yen average of 10 analyst estimates compiled by Bloomberg within the last 28 days. The carrier expects an increase in operating profit even after acquiring unprofitable Sprint, Son said.
“We aim to continue generating operating profit of more than 1 trillion yen,” Son said. “There’s no change to the trend that users want high-quality handsets.”
Revenue rose 5.5 percent to 3.4 trillion yen, and net income fell 7.8 percent to 289 billion yen, the company said.
“There isn’t much concern for the company’s main business,” said Hiroshi Yamashina, an analyst at BNP Paribas SA in Tokyo. “Earnings will likely keep growing as smartphone demand will likely remain strong.”
SoftBank has more experience in wireless phone networks than Dish, which gets most of its sales from satellite broadcasting, with the Japanese company’s offer giving the U.S. carrier more buying power and less debt to repay than Dish’s $25.5 billion proposal, Son said.
“People ask me will SoftBank be increasing the price for the offer? Why should we?” Son told reporters in Tokyo today. “We are already providing a better deal than the Dish proposal.”
SoftBank’s bid for Sprint includes paying $12.1 billion to the U.S. company’s shareholders and $8 billion of new capital for a 70 percent stake, the companies said in an Oct. 15 statement.
Son said SoftBank’s offer is worth $7.65 a share for Sprint after including “synergies” and the time delays and costs of the rival offer, compared with $6.31 for the Dish proposal.
SoftBank didn’t change its offer for Sprint today.
Sprint has to pay SoftBank $600 million if it recommends a rival offer, according to terms of the deal. The Japanese company in October closed the purchase of $3.1 billion of convertible bonds than can be exchanged for more than 590 million Sprint shares.
Some Sprint shareholders, including Omega Advisors Inc. and billionaire John Paulson, said they preferred Dish’s offer.
Sprint has tentatively set June 12 as the date for a shareholder vote on SoftBank’s offer, the U.S. wireless company said last week.
The Japanese company is introducing IFRS, or international financial reporting standards, from the current fiscal year as it prepares for the Sprint acquisition. The possible impacts of that switch from the Japanese accounting standard include deducting commissions for handset dealers from revenue and adopting another goodwill impairment method, the company said April 8.
Raising the bid would make billionaire Son’s ambition to expand into the U.S. cost more, while the company’s credit ratings are already under review for a possible cut to junk.
Standard & Poor’s and Moody’s Investors Service Inc. have put the Japanese company’s credit ratings under review for possible downgrade on concern the Sprint acquisition may undermine its financial strength. A downgrade of one step would bring the rating to a speculative, or junk, ranking at Moody’s.
Son, Japan’s second-richest man, said in October he targeted Sprint because it can challenge Verizon Wireless and AT&T Inc.’s dominance of the U.S. mobile-phone industry.
The 55-year-old’s stated goal is to create the largest mobile-services provider in the world by revenue, surpassing Verizon, Vodafone Group Plc and China Mobile Ltd.
SoftBank earlier this year spent about 25 billion yen for a 6.4 percent stake in Gungho Online Entertainment Inc., a developer of Internet and mobile phone games run by Taizo Son, a younger brother of the SoftBank president, the company said April 27.
Earlier this month, NTT DoCoMo Inc., Japan’s biggest carrier, forecast a 2.9 percent increase in net income to 510 billion yen in the year to March 2014. KDDI Corp., Japan’s No. 2 mobile-phone operator, today projected a 22 percent jump to 295 billion yen.