Japan’s SoftBank reported its operating profit for Q2 fell 23 per cent to JPY259 billion ($2.37 billion) as it cut its earnings forecast for fiscal 2014/15 by 10 per cent ($882 million) to JPY900 billion ($7.9 billion) due to problems at its US operation Sprint.
Benefitting from a JPY563.1 billion gain from Alibaba’s recent IPO in the US, SoftBank’s net profit for the quarter ending 30 September increased almost threefold to JPY497 billion. SoftBank owns about 30 per cent of China’s largest e-commerce company.
But its US unit, Sprint, which SoftBank purchased last year for more than $21 billion, lost more than 300,000 customers over the past year and Monday said it would cut its workforce by 2,000.
Sprint also announced on Monday its earnings for the year would be down 15 per cent to about $5.8 billion. SoftBank’s financial statement said Sprint’s postpaid ARPU fell 5.7 per cent to $60.58 from $64.11 a year ago. Prepaid ARPU increased 7.3 per cent to $27.19.
Sprint, with about 55 million mobile connections, is the third ranked operator in the US after leaders Verizon Wireless and AT&T Mobility, which together have a 66 per cent market share.
“Sprint’s battles will be long and tough, and it’s not something that can be fixed in a short time,” SoftBank’s CEO Masayoshi Son (pictured) told reporters, according to Reuters. “Along with cost cuts, we want to increase prime customers, not sub-prime customers, and we are already seeing things turn better,” Son added, saying Sprint’s focus is on long-term business rather than short-term, stop-gap fixes.
For the six-month period ending 30 September SoftBank Mobile added 1.12 million subscribers, bringing its total user base to just over 37 million. ARPU fell by JPY260 to JPY4,260 in the last quarter, which the company said was caused by an increase in the use of low-ARPU devices as well as a decline in voice calls. Its churn rate edged up from 1.11 per cent in Q1 to 1.27 in Q2.
Its earning per share rose to JPY471.74 from JPY344.20 from H1 2013.
With little prospect for major growth in Japan’s saturated domestic market, and the problems facing Sprint, Son’s SoftBank is embarking on major investments elsewhere, including the Indian market.