October 2, 2013 / 7:17 AM / 4 years ago

SoftBank hits 13-1/2 year high as DoCoMo seen struggling to lure clients

TOKYO (Reuters) - Shares of SoftBank Corp (9984.T) hit the highest since the dot.com bubble on Wednesday, with traders citing short-covering by investors who put aside worries it would add fewer subscribers after rival NTT DoCoMo Inc (9437.T) also started selling Apple Inc’s (AAPL.O) iPhone.

The two iPhone models under DoCoMo, a cheaper version in bright colours and an updated high-end device, went on sale on September 20. Even so, traders said that there was relief for SoftBank on reports that DoCoMo could struggle to attract subscribers due to lack of inventory.

DoCoMo had long resisted offering the iPhone to its 60 million customers amid differences with Apple over branding and sales margins. It has lost market share to SoftBank and KDDI Corp (9433.T), which have been selling Japan’s best-selling smartphones since 2008 and 2011, respectively.

“According to media reports, subscriber momentum has been affected by consumers’ unexpectedly strong skew toward the gold and silver iPhone5S models and consequent inventory shortages,” Goldman Sachs wrote in a report on Tuesday.

“We see a situation where lack of inventory for the popular models is resulting in lack of iPhone sales growth for both replacement handsets and carrier switchovers.”

On Wednesday, SoftBank rose as high as 4.5 percent to 7,270 yen, the highest since February 2000 and was the most traded stock by turnover on the main board. It closed up 4 percent at 7,240 yen, outpacing the benchmark Nikkei .N225, which shed 2.2 percent to a three-week low.

DoCoMo shares dropped 1.3 percent to 1,546 yen, while KDDI added 0.6 percent to 5,080 yen.

“Investors who had shorted SoftBank shares on worries that DoCoMo’s launch would result in fewer subscribers bought back,” a fund manager at a Japanese asset management firm.

    Traders also said Chinese e-commerce company Alibaba Group Holding Ltd’s ALIAB.UL decision to pursue an initial public offering in New York is supporting sentiment in SoftBank.

    “The IPO is important to SoftBank as it’s one of the major shareholders, as Alibaba’s market valuation would add billions of dollars to SoftBank’s assets,” said Yoshiyuki Kondo, an analyst at Daiwa Securities.

    SoftBank is Alibaba’s biggest shareholder with a 36.7 percent stake.

    SoftBank shares are up 130 percent so far this year, outperforming a 25 percent rise in DoCoMo.

    In terms of valuations, SoftBank is the most expensive, with a 12-month forward price-to-earnings ratio of 19.4 versus DoCoMO’s 12.6 and KDDI’s 11.4, according to Thomson Reuters Datastream.

    Editing by Dominic Lau and Stephen Coates

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