SoftBank Corp, the Japanese mobile carrier with ambitious plans to grow overseas, slashed its profit forecast as Sprint Corp, the US carrier it bought for $21.6 billion, continues to lose customers with no quick fix in sight.
In a statement on Tuesday, SoftBank said it now expects an operating profit of 900 billion yen ($7.9 billion) in the 12 months through March 2015, 10 per cent down from the 1 trillion yen profit it previously estimated, citing Sprint's troubles. The warning came as SoftBank said its second-quarter operating profit fell 23 per cent.
SoftBank bought the number three US mobile carrier last year as part of Chief Executive Masayoshi Son's drive to expand outside Japan, but Sprint has been undergoing a painful revamping of its network that has caused a mass exodus of subscribers. On Monday, Sprint said it will fire 2,000 employees and make leadership changes as it seeks to cuts costs after several quarters of losses.
"Sprint's battle will be long and tough, and it's not something that can be fixed in a short time," SoftBank's Chief Executive Masayoshi Son told reporters in Tokyo. On Monday, Sprint made a major cut to its forecasts for 2014 adjusted earnings, saying it now expects between $5.8 billion and $5.9 billion, down from $6.7 billion to $6.9 billion.
SoftBank also said July-September operating profit was 259.0 billion yen, down from 337.1 billion a year earlier and below the 296.9 billion yen average of estimates made by four analysts, according to Thomson Reuters StarMine.
With scant prospects for major growth in Japan's saturated but sluggish domestic market, Son has led the cash-rich company on a string of high-profile acquisitions and investments in telecom and Internet-related businesses. Son is Japan's richest man through his near-20 per cent stake in SoftBank, now worth about $85 billion by market value and also the biggest investor in recently listed Chinese e-commerce giant Alibaba Group Holding Ltd.
Broadening his international strategy from the United States and China, Son also last month laid out plans to invest $10 billion in online retail in India. The country has the world's third-largest Internet user base, but e-commerce is still relatively underdeveloped there.
While fixing Sprint may distract SoftBank in its expansion drive, the company said on Tuesday it booked a bigger gain in the second quarter from the New York listing of Alibaba than it had previously anticipated.
SoftBank said its net profit for the quarter was boosted by a 563.1 billion gain from the Alibaba deal, up from the 500 billion it previously estimated. SoftBank's net profit for the quarter almost tripled from a year earlier to nearly 500 billion yen.