SoftBank Plans Phone Unit IPO as Son Shifts Focus to Deals

SoftBank’s Masayoshi Son unveiled plans for an initial public offering of his domestic telecom operation, signaling the evolution of his business empire and his increasing focus on investments in startups such as Uber, according to Bloomberg.

The separation of their activities, essentially into investing and telecommunications arms, will bring “greater clarity and thereby better respond to the various needs of investors,“ the company said in a statement. Son said at a news conference the telecom business will emphasize dividend payments and that he’s aiming for a listing within a year.

Son has stepped up investments in technology companies over the past year, using cash flow from his telecom operations to take stakes in startups such as Uber, China’s Didi Chuxing and India’s Flipkart Online. Yet investors have given SoftBank little credit for those deals, as the company’s market capitalization has lagged well below the value of its assets. Spinning off the mobile phone unit may help close that gap, while raising capital and relieving some of the company’s debt burden.

“With the IPO of SoftBank’s Japan operations, the various parts of the company can continue to grow independently,“ Son said. “This way I can also spend more time on longer-term global corporate strategy.“ SoftBank unveiled plans for the IPO as it reported earnings that fell short of estimates. Operating profit was 274 billion yen ($2.5 billion) in the period ended December. Sales came in at 2.4 trillion yen.

Net income totaled 912 billion yen, well above estimates of 151 billion yen, in part because of Sprint. The U.S. wireless operator had deferred tax liabilities of 830 billion yen reversed due to changes to U.S. tax code. Sprint also reported better-than-expected results in the most recent quarter, adding 256,000 net postpaid subscribers on all devices.

Earnings from SoftBank’s domestic operations may come under pressure as billionaire Hiroshi Mikitani’s Rakuten plans to become the country’s fourth major mobile-phone operator. Son, whose acquisition of Vodafone’s Japan business in 2006 was the industry’s biggest shakeup in recent history, has said he welcomes the competition.

Earnings before interest and taxes at domestic telecom operations fell 3.1 percent to 964 billion yen in the nine-month period ended December, as the company offered discounts to bring in new users. The company has 33 million subscribers. SoftBank hasn’t said how much of the phone business it plans to sell or how much money it expects to raise, though it did say the unit would remain "major consolidated subsidiary.