SoftBank Operating Profit Rises as Son Sees Sprint Revival

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  • Subscriber and average revenue continuing to grow in Japan
  • Chairman Masayoshi Son sees more scope to cut Sprint costs

SoftBank Group Corp.increased third quarter operating income 7.3 percent on new Japanese wireless customers as billionaire Chairman Masayoshi Son sees signs of a turnaround at its beleaguered U.S. unit Sprint Corp.

Operating profit rose to 189.6 billion yen ($1.65 billion) in the three months ended Dec. 31, the Tokyo-based company reported on Wednesday. Net income fell 88 percent to 2.3 billion yen.

SoftBank stock has been hammered by pessimism about Son’s ability to turn around Sprint after he paid $22 billion for a controlling stake in 2013. With about $100 billion of debt, ending losses at the U.S. wireless carrier is seen as critical to reviving the shares, with Son saying Wednesday that the struggling unit is making progress.

“Sprint is showing definitive signs of a turnaround,” Son told reporters in Tokyo. “There are yet more opportunities for cost cutting at Sprint.”

Sales for the quarter rose 4.3 percent to 2.4 trillion yen. The company didn’t provide full-year forecasts.

Shares of SoftBank fell 3.5 percent to 4,603 yen in Tokyo before the earnings were announced. The stock has fallen 25 percent this year.

User Growth

Average revenue per user for its main phone business in Japan rose to 4,720 yen in the third-quarter, as data usage increased, SoftBank said. The company added 74,000 net new subscribers in the period to a total of 31.7 million users. Profit in the business rose 12 percent to 172.4 billion yen.

“Sprint is indeed coming around, but it’s a recovery driven largely by cost cuts,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “Son is correct in saying that Sprint has hit bottom, which matches investors’ assessment.”

Sprint, which had been hemorrhaging cash over the past year, increased its cash and equivalents by almost 12 percent to $2.2 billion in the December quarter. The U.S. company increased its profit forecast, calling for earnings before interest, tax, depreciation and amortization of as much as $8 billion in fiscal 2016, compared with a previous outlook for up to $7.1 billion.

The U.S. carrier is SoftBank’s second biggest investment, trailing only its stake in Alibaba Group Holding Ltd. Sprint’s shares have fallen 27 percent this year, while those of Alibaba have slumped 24 percent.