July 31 (Bloomberg) -- SoftBank Corp., the Japanese carrier that acquired Sprint Corp for $21.6 billion, posted profit that beat analyst estimates after using Apple Inc.’s iPhone and acquisitions to lure subscribers.
Net income rose to 238.3 billion yen ($2.4 billion) in the three months ended June from 105.6 billion yen a year earlier, the Tokyo-based company said in a statement yesterday. That beat the 198 billion-yen median estimate of three analysts surveyed by Bloomberg News. Shares jumped the most in a week today.
Billionaire President Masayoshi Son is forecasting record domestic earnings this year as he accelerates the addition of new subscribers and the Sprint deal saves $2 billion annually by pooling purchases of handsets and network equipment. SoftBank, which owns a share of Alibaba Group Holding Ltd., bought a stake in game company GungHo Online Entertainment Inc. and gained control of eAccess Ltd. to add bandwidth as Son seeks to transform Japan’s No. 3 mobile carrier into the world’s biggest.
“SoftBank’s business in Japan is sound with sufficient cash flow and no large risk here,” said Yoshihiro Nakatani, a senior fund manager at Asahi Life Asset Management Co. in Tokyo. “The question is how fast SoftBank can turn around Sprint. Investors think it will take time.”
Full-year operating profit on a consolidated basis will be at least 1 trillion yen, making up an expected operating loss from Sprint, Son said. The company had said the profit from its domestic operation would top the figure.
SoftBank rose as much as 4.9 percent, headed for the biggest gain in more than a week, and traded at 6,520 yen at 9:15 a.m. in Tokyo trading. The stock has more than doubled this year while Japan’s benchmark Topix index has added 32 percent.
“Our main business is doing well, and we got one-time gain from GungHo, whose business is also doing well,” Son said yesterday as a reason for revising the estimate.
First-quarter results included 253.9 billion yen of gains from consolidating GungHo and Willcom Inc. Operating profit for the quarter was 391 billion yen, beating the 389 billion-yen median estimate of six analysts in the Bloomberg survey.
SoftBank added 810,500 net users in the quarter, outpacing the 87,200 new customers signed up by NTT DoCoMo Inc. and the 668,700 that joined KDDI Corp. SoftBank got 67 percent of total sales from its mobile operations last financial year.
SoftBank bought local competitor eAccess to meet bandwidth demand for smartphones in January. Willcom became SoftBank’s consolidated unit after it left rehabilitation proceedings from bankruptcy, SoftBank said July 1.
“SoftBank is stealing market share from bigger rivals with its various measures,” Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo, said before the announcement yesterday.
Son, Japan’s second-richest man according to the Bloomberg Billionaires Index, 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.
SoftBank acquired a 78 percent stake in Sprint, the third-largest U.S. mobile carrier. Son wants to replicate its domestic success with Sprint’s 55.2 million subscribers by improving networks and services, he said. Annual savings at Sprint will be about $2 billion in the first four years from cost cutting, he said at SoftBank’s annual shareholder meeting last month.
Sprint yesterday reported a wider-than-predicted loss after the company shut down its Nextel network and shed more than 1 million monthly subscribers. The second-quarter loss was $1.6 billion, or 53 cents a share, it said in a separate statement. Analysts had estimated a loss of 31 cents on average, according to data compiled by Bloomberg.
“I expect Sprint would make a V-shaped recovery at an early stage,” Son said yesterday. The company will focus on improving mobile devices, network service, branding and content to revive growth at the U.S. carrier, he said.
The takeover included a $5 billion cash infusion, giving Sprint money to bolster its network and pursue its own acquisitions. Earlier this month, Sprint bought out the remaining shares of Clearwire Corp for $3.9 billion, giving it full control of a company that it owned a majority of. The deal provides Sprint with a large swath of airwaves it will use to improve its network and roll out fourth-generation services in the U.S.
SoftBank, founded in 1981, has stakes in more than 1,300 companies, it said in a presentation. SoftBank has a 36.7 percent stake in Alibaba Group Holding Ltd., China’s largest e-commerce company, making it the biggest investor, it said.
Alibaba’s full-year net income may total more than 200 billion yen if the first-quarter net income of 66.9 billion yen is repeated the rest of the year, Son said.
“Alibaba keeps growing, so earnings would be much bigger than this,” Son said.
Moody’s Investors Service and Standard & Poor’s cut SoftBank’s credit ratings to non-investment grades earlier this month as the company completed the Sprint acquisition.
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