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SoftBank Gets Q1 Boost From Sprint, Vision Fund

Japan's SoftBank has received a boost to sales and earnings from Sprint, its US telecom subsidiary, as well as the inclusion of its Vision Fund investment vehicle in its April-to-June financials.

The company, which manages one of Japan's biggest telecom operators and has technology investments in various other parts of the world, saw its revenues grow by 2.8% in its first quarter, to around 2.19 trillion Japanese yen ($19.8 billion), compared with the year-earlier period, thanks to the growing contribution from Sprint, the fourth-biggest mobile operator in the US.

Due partly to favorable foreign exchange movements, sales from Sprint Corp. (NYSE: S) rose 4.2%, to about JPY910 billion ($8.2 billion), while adjusted EBITDA was up 18.5%, to JPY322 billion ($2.9 billion).

The update comes amid speculation that SoftBank Corp. is trying to negotiate a merger between Sprint and either cable giant Charter Communications Inc. or mobile rival T-Mobile US Inc. , which was the subject of an abortive takeover attempt by Sprint in 2014. (See Sprint's CEO Expects M&A-Related Announcement 'Soon'.)

Any deal, it is hoped, would give Sprint the muscle to compete more vigorously against market leaders AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), but could face opposition from US competition and regulatory authorities concerned about the impact on competition.

SoftBank also booked a huge gain in operating income, which rose 50.1%, to JPY479 billion ($4.3 billion), after including operating income from its Vision Fund in overall figures.

SoftBank announced the establishment of the $100 billion private equity fund back in May in partnership with Saudi Arabia's sovereign wealth arm and several other high-profile investors, including the United Arab Emirates' Mubadala Investment Company, Apple Inc. (Nasdaq: AAPL), Foxconn Electronics Inc. and Qualcomm Inc. (Nasdaq: QCOM). (See SoftBank Seeks Another $7B in Plan for World Tech Domination – Report.)

While the Vision Fund had not made any investments by the end of the first quarter, a valuation gain was recognized from some investments that SoftBank is transferring to the private equity vehicle.

SoftBank's net income took a big hit, however, tumbling 88.8%, to just JPY30.5 billion ($280 million), because of derivative losses linked to its investment in Chinese ecommerce giant Alibaba Group .

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For the first time, SoftBank also recorded first-quarter results from UK chip company ARM, which accounted for about JPY47 billion (420 million) in sales but made a segment loss of JPY6.9 billion ($60 million). (See SoftBank Muscles In on ARM in $32B Deal.)

ARM Ltd. provides designs for the smartphone processors used in many of the world's most popular handsets, but SoftBank believes the company could play a pivotal role in the future "Internet of Things" given its expertise at designing low-power technology.

In a statement, SoftBank said that ARM's employee numbers had grown by 330 in the first quarter, or by 6.8% compared with the end of the previous fiscal year, as it works on strengthening its R&D capability.

SoftBank's domestic telecom business, which accounts for more than a third of overall sales, saw revenues dip by 0.8%, to JPY756 billion ($6.8 billion), and adjusted EBITDA fall 6.2%, to JPY329 billion ($3 billion).

The operator blamed some promotional activity for a decline at its mobile business but flagged healthy growth in broadband revenues thanks to interest in fiber-based service offerings.

SoftBank said it was not providing a forecast for the fiscal year because of "numerous uncertainties affecting earnings."

The company's share price closed up 2.38% in Tokyo earlier today, with headline results beating analyst expectations.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

danielcawrey 8/7/2017 | 7:15:49 PM
ARM ARM might end up being SoftBank's smatest investment. The business model of ARM in designing and licensing chips is really smart. Low overhead, lots of upside. And processors these days all need to be low power and low heat. That's what ARM specializes in. 
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