- Sprint revamp to cause $1.2 billion charge in coming months
- Son says `gaining confidence' in turnaround of U.S. carrier
SoftBank Group Corp.’s profit rose after it added wireless customers at home, making up for widening losses at U.S. unit Sprint Corp. that forced Chairman Masayoshi Son to declare thousands of looming job cuts.
The company founded by Japan’s second-richest man had operating income of 342.2 billion yen ($2.8 billion) in the three months to September. That compares with the 336.3 billion yen average of five estimates compiled by Bloomberg.
Son again expressed confidence in turning around the fourth-largest U.S. wireless carrier, which has booked losses in all but one quarter over the past two years. The billionaire that built a global empire through debt-funded acquisitions is intent on taking on Verizon Communications Inc., AT&T Inc. and T-Mobile US Inc. by luring customers through costly discounts and promotions. SoftBank will take a $1 billion to $1.2 billion charge sometime this fiscal year or next for Sprint’s restructuring.
“Sprint is now in the position to increase the pace of user acquisition while cutting costs,” Son told reporters in Tokyo on Wednesday. “We will also cut staff. The cuts will be in the thousands.”
Dave Tovar, a spokesman for the Overland Park, Kansas-based carrier, couldn’t say how many jobs would be cut.
“We are working through the process to identify areas across the company where we can reduce costs,” he said. “That will include some job reductions. We will share more details when we can.”
Profit at SoftBank’s domestic wireless operations rose about 7 percent to 210.3 billion yen in the quarter, when the company added 36,000 net new subscribers. The company’s net income fell 56 percent to 213.3 billion yen after taking a one-time charge for the loss in value of subsidiaries.
Sprint’s approach echoed Son’s own strategy with SoftBank in its early years, when the entrepreneur accepted heavy losses to grow his initial customer base.
“Sprint’s strategy is to trade losses for subscriber gains,” Hideki Yasuda, an analyst at Ace Research Institute in Tokyo, said prior to the announcement. “While this has worked so far, it’s still too early for praise. SoftBank’s resources are tied up with Sprint, so they can’t make big moves in the domestic operations.”
Son has built SoftBank into one of the world’s most acquisitive companies, plowing cash from mobile operations and borrowing into more than 1,000 companies from Alibaba Group Holding Ltd. and Sprint to game maker Supercell Oy and India’s Snapdeal.com.
Sprint posted a net loss for the fiscal second quarter that was more than twice the average projected by analysts, after the company lured new subscribers with price-cutting promotions. It gained 237,000 monthly customers with the help of offers like $1-a-month iPhone leases.
Sprint Chief Executive Officer Marcelo Claure plans to cut $2.5 billion from the company’s more than $20 billion in annual costs. The carrier has struggled against rivals like Verizon Communications Inc. or T-Mobile US Inc., which Son failed to acquire after encountering regulatory uncertainty.
Claure said Tuesday that Sprint has stabilized its revenue level and will now “attack the costs” in almost every area of the business. He will have help on that front now that Son has purchased a house in Kansas City, Kansas to be closer to the process.
“There’s nothing wrong with having more time with your boss,” Claure said in an interview Tuesday. “He’s very smart and he’s been very helpful in improving our network engineering and how we work with vendors.”
On Wednesday, Son fired a shot at Sprint’s U.S. rivals.
“The U.S. carriers were saying the wireless service quality in the country is low because the place is so big. That was a lie, they didn’t try hard enough,” Son said. “We will show what an improvement looks like with Sprint’s network.”
The company has further plans to expand globally. Former Google Inc. executive Nikesh Arora was promoted to chief operating officer at SoftBank with a mandate to invest several billion dollars a year buying businesses around the world. SoftBank has announced 21 deals in 2015 with a total value of $4.3 billion, the most since 2012, according to data compiled by Bloomberg.
Shares of SoftBank rose 1.1 percent to 6,823 yen as of the close in Tokyo. Sprint was little changed, slipping 0.1 percent to $4.50 at 10:58 a.m. in New York.