* Softbank forecasts record 1 trln yen oper profit for year
to March 2014
* CEO Son acknowledges tough competition for Sprint, no
details on plans
* Alibaba IPO seen giving SoftBank leeway in ambitious
By Mari Saito
TOKYO, July 30 Japan's SoftBank Corp is
on course for a record annual profit after first-quarter
earnings doubled and its billionaire founder looks to expand his
Internet empire after buying a U.S. mobile carrier while his
prize holding - China's top online retailer Alibaba - prepares
for an IPO.
SoftBank CEO Masayoshi Son gave no new details on his plans
for No.3 U.S. mobile operator Sprint Corp at an earnings
briefing on Tuesday and declined to confirm media reports he bid
unsuccessfully for Universal Music even as he was in a bidding
war for Sprint.
But investors expect SoftBank's 36.7 percent stake in
China's Alibaba, which is expected to offer shares to the public
as early as this year, will give it a financial buffer to shore
up Sprint's network or to pursue other deals. Bankers estimate
Alibaba could be valued at up to $100 billion in the IPO.
"There is quite a lot of value that's held there," said
Nathan Ramler, head of research at Macquarie Securities in
Tokyo. "Alibaba, as well as other sources of investment that
SoftBank has, could be used as collateral if they were to get
into a difficult situation."
SoftBank issued a new forecast for consolidated operating
profit of 1 trillion yen ($10.2 billion) for the full year to
March 2014, in line with the average forecast of five analysts
surveyed by Thomson Reuters I/B/E/S of 1.01 trillion yen.
It also logged a record quarterly operating profit of 391.03
billion yen as it consolidated online game maker Gungho Online
Son acknowledged the company's challenges with its $21.6
billion Sprint deal, the biggest overseas acquisition ever by a
"The competition ahead of us in the United States, Sprint's
fight is no easy task," he told a news conference. "We are up
against major two players, Verizon and AT&T. It's great timing
that our other group companies overall are steadily growing
profits so that we can focus on that (U.S.) battle."
Investors balked when the Sprint bid was announced last
October, sending SoftBank's stock skidding 25 percent. Its
interest-bearing debt now tops $60 billion and credit rating
agencies Moody's and S&P slashed its debt rating to "junk".
"We are concerned that Sprint may not be able to generate
enough cashflow to cover its own $16 billion capital
expenditures," said Peggy Furusaka, a senior credit officer at
Moody's Japan. "In our stress case scenario, we assume SoftBank
may need to debt finance $11 billion over two years to support
But in a testament to Son's ability to win investor trust in
his high-stakes investment gambles, SoftBank's shares are now
more than double their value before the deal and it boasts the
third-biggest market capitalisation in Japan, behind only Toyota
Motor Corp and Mitsubishi UFJ Financial Group Inc
"People used to say Son was an alchemist," said Yasuo
Sakuma, portfolio manager at Bayview Asset Management in Tokyo.
"He buys companies small, holds onto them through bubbles and
then reaps the rewards afterwards to fund further M&A deals.
That's how SoftBank was built."
Alibaba has been a key part of the alchemy. Son initially
invested $20 million in the Chinese company in 2000, just a year
after Jack Ma started it in his apartment.
Alibaba is now the world's biggest online retailer,
outstripping Amazon.com Inc and eBay Inc, and
SoftBank is its biggest shareholder with a 36.7 percent stake.