Japan-based SoftBank reported a sharp drop in net income for its fiscal Q1, covering the three months to end-June, with significant derivative losses offsetting strong profit gains at US-based Sprint and other new investments.

Due to a derivative loss of JPY257 billion ($2.4 billion), the company’s net profit attributable to owners of the parent for the quarter dropped 97.8 per cent year-on-year to JPY5.5 billion. Without the loss, its profit would have increased 61 per cent to JPY183 billion, the company said.

The loss was related to a financial arrangement a year ago to sell shares in Alibaba through a trust to raise funds, Bloomberg reported. Alibaba’s stock since jumped more than 80 per cent, forcing SoftBank to recognise the difference.

Consolidated revenue rose 2.8 per cent to JPY2.19 trillion, with gains from Sprint, processor-maker ARM and Yahoo Japan making up for declines in its Japanese telecoms business.

The earnings report included its Vision Fund, the world’s largest private equity fund, as a new reportable segment and booked a JPY105 billion gain on its stake in graphics chipmaker Nvidia.

Speaking at the company’s earnings announcement, SoftBank CEO Masayoshi Son said its Vision Fund investments would help lay the foundation for the company’s future, while also confirming interest in securing a stake in Uber or ride-hailing rival Lyft.

Domestic business
Turnover of its telecoms business in Japan fell 0.8 per cent year-on-year to JPY756 billion, with service revenue down 0.6 per cent to JPY602 billion and mobile revenue dropping 4.5 per cent to JPY459 billion.

The one bright spot in its domestic business was its broadband segment, which grew 31 per cent to JPY77.8 billion. It focused on promoting home bundles by offering discounts on mobile services to customers subscribing to both mobile and broadband services as a way to acquire smartphone uers.

Net smartphone additions in the March to June quarter rose 61 per cent year-on-year to 450,000. Total ARPU dropped 5 per cent to JPY3,830.

Income for the domestic telecoms segment fell 8.6 per cent year-on-year to JPY218 billion. Income for fiscal 2017 is forecast to fall 7 per cent due to the home bundle discounts.

Other segments
Revenue at SoftBank’s chip unit ARM – which it acquired in September 2016 – increased 2 per cent year-on-year to JPY47.8 billion during the quarter, with chip shipments growing 28 per cent to 4.7 billion units.

The company said it expanded its headcount at ARM 25 per cent over the past year to end-June to nearly 4,300.

Yahoo Japan’s revenue increased 3.6 per cent to JPY212 billion. Advertising revenue rose 8 per cent during the quarter to JPY70.4 billion, with shopping transaction volume rising 40 per cent to JPY140 billion.

US market
Sprint, SoftBank’s largest business segment, last week reported a net profit of $206 million during the period, its first quarterly profit in three years, with revenue rising 2 per cent to $8.2 billion.

The operator, the fourth largest mobile player in the US, cut costs during the quarter from a year ago by $370 million to $3.6 billion.

Son is pushing for a merger with Charter Communications, a cable operator in the US, and Sprint reportedly resumed merger talks with T-Mobile US.

In the earnings call, Son said: “In order for the company [Sprint] to grow further, we are considering multiple consolidation options. The negotiations are proceeding apace and we should be able to arrive at a decision soon.”

Sprint sees signs of further growth and is projecting adjusted EBITDA of $10.8 billion to $11.2 billion for fiscal 2017.