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UPDATE 3-Softbank profit jumps on mobile user growth

(Adds investor comment, details)

TOKYO, Nov 6 (Reuters) - Japanese telecoms and Internet group Softbank Corp's 9984.T operating profit rose 49 percent in the first half as its wireless unit's new price plans and a marketing blitz won subscribers from bigger rivals.

Softbank, which bought Vodafone Group Plc's VOD.L Japan mobile unit last year, will stick to its cut-price strategy to lure more users from bigger rivals NTT DoCoMo Inc 9437.T and KDDI Corp 9433.T, its president said on Tuesday.

The company reported an operating profit of 167.75 billion yen ($1.5 billion) in April through September, up from 112.55 billion the previous year.

"I don't expect any drastic slowdown in the third or fourth quarter," said Softbank's founder and president Masayoshi Son, who made billions by investing in Internet ventures like Yahoo Inc YHOO.O in the United States.

Fifteen analysts polled by Reuters expect the company, which does not give full-year forecasts, to post an 18 percent rise in operating profit to 320.4 billion yen in the year to March.

The carrier, which holds a 33 percent stake in the parent of newly listed Chinese e-commerce firm Alibaba.com 1688.HK, is looking for future growth for its Internet contents businesses via zippy and powerful mobile phones.

“It’s positive that Softbank has engaged in a firm such as Alibaba,” said Tomomi Yamashita, fund manager at Shinkin Asset Management Co. Ltd. Profits in the mobile phone business and Softbank’s willingness to launch new businesses and become more investor-friendly are positive news for the stock, he said.

Softbank has been sharply undercutting rivals to win 1.1 million new users in the first half, mostly from DoCoMo, which controls over half of Japan’s mobile phone service market.

HEAVY USERS

Lower phone charges do not necessarily mean lower profitability, since Softbank’s new users typically are heavy phone users, Son told a group of analysts.

But aggressive price campaigns are hurting Softbank’s average monthly revenue per user, which dropped by 200 yen to 4,800 yen in July through September from the previous three months, in the fourth straight quarterly decline.

Softbank’s first half net profit reached 46.46 billion yen, compared with 14.44 billion the previous year.

Saddled with debt that totalled 1.67 trillion yen at the end of September, mostly due to its purchase of the Vodafone unit, Softbank has been speeding up debt repayment.

But it would not place priority on debt payments over user services and the need to build new base stations, Son said.

Prior to the results, shares of Softbank closed down 6.5 percent at 2,500 yen, while DoCoMo fell 0.6 percent and KDDI rose 1.9 percent. The Nikkei average .N225 fell 0.1 percent.

Rivals KDDI posted an 8.8 percent operating profit rise to 249.6 billion yen in April to September, while DoCoMo last week reported a 21 percent decline in profit to 408.5 billion yen, as subscribers chose KDDI’s or Softbank’s price plans.

Prompted by regulators and by Softbank’s success in winning users, KDDI and DoCoMo are cutting call rates and basic monthly charges while reducing subsidies paid to handset vendors.

But despite fears of intensifying price competition, Softbank shares have risen 28 percent since hitting a one-year closing low in September, boosted in the weeks leading to Alibaba.com’s Tuesday listing.

“Our investment in Alibaba was good,” Son said. “(But) I think more potential lies in other parts of Alibaba,” like Alibaba’s auction operation Taobao.com, which is likely to list “in the near future,” he said.

Softbank will post any proceeds from Alibaba Group’s sale of a part of its holdings in Alibaba.com in the third quarter. (Additional reporting by Aiko Hayashi; Editing by Malcolm Whittaker and David Holmes)

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