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 .
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, , News Editor, Light Reading