SoftBank turns the corner after bruising price war

Japan's SoftBank Corp. has blown through its own forecasts with a rosy full-year result, reporting gains across the board and raising guidance for next year.

That includes its core consumer mobile division, which after three years in the red during a brutal price war boosted operating profit by 7%

"We have come out of the long dark tunnel," CEO Junichi Miyakawa told an earnings call Thursday.

The telco reported a 14% underlying rise in operating profit of 876 billion Japanese yen (US$5.6 billion) and a 3% rise in revenue to JPY6.08 trillion ($39 billion). Net profit was JPY489 billion ($3.14 billion), up 45% when excluding the revaluation gain on its payment service Pay Pay.

SofBank said revenue, operating profit and net earnings all exceeded its revised forecasts issued in February.

For the coming year it is tipping a 2% rise in revenue and 3% higher operating income. It also believes it will pass its JPY970 billion ($6.23 billion) operating profit target set for the 2025-2026 year and break through the 1 trillion-yen mark.

This year it is pushing ahead with its AI business, setting aside JPY150 billion ($970 million) for AI hardware, including the first batch of NVIDIA's new B200 GPU chips.

'Up to 100%'

The investment will lift its computing capacity from 0.7 Eflops to 25.7 Eflops, with plans late next year to start building a 1 trillion-parameter LLM.

Meanwhile Miyakawa has the tricky task of concluding a deal with Korean tech giant Naver over the mandatory sell-down of its stake LY Corp., the operator of the popular Line messaging app.

Japan's Ministry of Internal Affairs and Communications issued a guidance in March calling for the Korean company to “review” its investment in LY following a series of data breaches that resulted in the leaking of the personal details of 520,000 Line customers.

But it's become clear that the government wants to see Naver cut its stake, as seen when LY Corp. chief Takeshi Idezawa told an earnings call Wednesday that he was “strongly requesting its largest shareholder, Naver, to change its capital ties.”

LY is 64.5% owned by A Holdings, a 50:50 JV between SoftBank and Naver. The company was created in a merger between Yahoo Japan and Line in 2019.

Miyakawa confirmed that talks were underway with Naver about restructuring their LY investment. He could not elaborate any further but said SoftBank’s share of the investment could be anything up to 100%.

"Anything is possible, so long as the percentage does not have a negative impact on the business. Also, we have a limitation in terms of financial capacity, he said.

Line has more than 200 million users, including more than 70% of Japanese uers, and is hugely popular in Taiwan, Thailand and Indonesia.

The forced sell-down has not been well-received in South Korea, where the Line technology was developed.

As an unnamed IT expert reportedly told The Chosun Daily that the ruling is a sign Japan is trying to hold back the popularity of Korean platform and content providers like Naver and Kakao.

“As Line Yahoo’s influence expanded in Japan, they are now using a minor issue as an excuse to tell Naver to cease its services and depart,” the expert said.

SoftBank Corp's stock closed 0.45% higher Thursday.