SoftBank Plunges to Lowest Since Sprint Buy as Doubts Mount

  • SoftBank shares at their lowest since deal closed in 2013
  • Sprint's cost-cutting measures seen as potentially risky

SoftBank Group Corp. fell to its lowest level since buying Sprint Corp. in 2013 amid mounting pessimism that billionaire Masayoshi Son can turn around the money-losing U.S. carrier.

SoftBank shares dropped 7.9 percent in Tokyo on Monday to 5,111 yen, their lowest since June 2013. Sprint closed 10 percent down on Friday after a report said the company was finalizing plans to cut $1 billion in network costs through measures analysts called risky.

Son said in August he was personally involved in rebuilding Sprint’s network and already saw “light at the end of the tunnel” for the carrier. Since then, Sprint booked its fifth consecutive quarter of losses, and SoftBank may book a charge of as much as $1.2 billion this fiscal period for a turnaround that Son said may not come for a few years.

“There is a longer-term concern about Sprint’s ability to improve its network, and the report on Friday suggested it won’t be able to balance cost cuts with quality,” said Satoru Kikuchi, an analyst at SMBC Nikko Securities Inc. in Tokyo. “In the short term, the market is also looking at Sprint’s refinancing needs.”

Nomura Holdings Inc. lowered its SoftBank price target by 12 percent to 7,550 yen in a report released Monday.

Sprint’s Network

Sprint is working to move radio equipment from tower space it leases from Crown Castle International Corp. and American Tower Corp. to spots on lower-cost, government-owned properties, according to a report in Re/code.

The carrier also is seeking to reduce its reliance on AT&T Inc.’s and Verizon Communications Inc.’s fiber-optic cables that provide links to the towers and mobile switches -- known as the “backhaul,” the report said.

During the next three years, the company must also address six bonds coming due with an aggregate principal amount of $7.6 billion. These issues account for 28 percent of all communications bonds set to mature by year-end 2018, Bloomberg Intelligence analyst Stephen Flynn wrote in a note Friday.

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 including Verizon and T-Mobile US Inc., which Son failed to acquire after encountering regulatory opposition.

The strategy of trading losses for subscriber gains has taken a toll on Sprint’s market value. According to SoftBank’s website, the company is worth about 860 billion yen ($7.3 billion) less than what Son paid for it in July 2013. At the same time, a slowdown in China brought down shares of Alibaba Group Holding Ltd., SoftBank’s biggest holding, by 22 percent last year.

“There will always be fans of SoftBank, it’s just at this moment in time, no one cares --it’s out of fashion,” said Andrew Clarke, director of trading at Mirabaud Asia Ltd. in Hong Kong. “They have too many concerns about Sprint and Alibaba because those shares are being crushed.”

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