SoftBank reports flat quarter as mobile discounts bite

SoftBank Corp has reported flat first quarter earnings as the company grapples with heated mobile price competition.

CEO Junichi Miyakawa said the company took a 10 billion yen ($91.8 million) revenue hit from price-cutting in the quarter and anticipated this would reach 70 billion yen over the full year. The company, the Japan mobile subsidiary of Masayoshi Sun's SoftBank Group, announced net income of 151.0 billion yen ($1.39 billion), slightly down from 152.1 billion a year ago.

Staying mobile: Hefty discounts have bitten into Softbank's quarterly results.  (Source: knowmadic media on Flickr CC 2.0)
Staying mobile: Hefty discounts have bitten into Softbank's quarterly results.
(Source: knowmadic media on Flickr CC 2.0)

It boosted revenue by 16% to 1.36 trillion yen as a result of consolidation with messaging provider Line and aided by the recovery in handset sales, the company said. But industry price-cutting, driven by the arrival of newcomer Rakuten, ensured mobile services revenue was virtually unchanged at 408 billion yen.

Loss leader

Miyakawa warned that the discount war would likely have a greater impact in the remaining three quarters of the year. He said price competition had also driven up the churn rate early in the quarter but was now "within expectations." This had been aided by the launch of the new value brand LineMo offering an ultra-low price of 900 yen ($8.30) that had helped stem the loss of customers.

Total smartphone subs had increased 7% sequentially to 26.2 million - but the lower prices had also driven down ARPU by 100 yen. Miyakawa said LineMo had been a bigger hit with consumers than expected, but prior to launch the company had regarded it as a "drastic step" to claw back momentum. SoftBank had prided itself as being a price leader but "somehow we were on the defensive, so maybe we needed to go back to the starting point and go on the offense."

Short futures

Looking forward, he said the company was worried that the semiconductor shortage would limit supply of iPhones. Already SoftBank had been unable to obtain enough iPads, he said. "We are wondering whether there will be sufficient supply of iPhones going forward." Among the other business segments, he said the enterprise solutions group had "over-achieved" again, with operating income up 23% and more than 70% of revenue from recurring cloud, security and other services.

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Miyakawa acknowledged 5G take-up was being held back by the limited rollout, with just 13,000 basestations deployed, less than\ 10% the size of the LTE network. SoftBank aimed aiming to reach 50,000 by next spring to cover 90% of the population. When we make that happen we believe the traffic will increase," he said.

He said the company saw a huge opportunity in IoT services. "If we don't get it wrong, we believe there will be a business bigger than our consumer business."

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— Robert Clark, contributing editor, special to Light Reading

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