Softbank Profitable Again, But Faces Tough Road Ahead

| About: SoftBank Group (SFTBF)
This article is now exclusive for PRO subscribers.

In today's Wall Street Journal, Yukari Iwatani Kane reports on Softbank Corp.'s Q1 earnings in: Softbank Ekes Out $12.3 Million Profit.

Softbank's (OTCPK:SFTBF) (Tokyo: 9984) $15 billion acquisition of Vodafone Japan in April helped boost its revenues by 91% in the quarter ended June 30th to 494.23 billion yen ($4.3b) with its mobile unit accounting for 47% of that. Net income returned to the black at 1.42 billion yen ($12.3m) from an 11.15 billion yen loss last year. In October, Softbank will rebrand its mobile unit as Softbank Mobile and plans to unveil new phones and services. Its big challenge however, is that number portability becomes available at the same time and everyone will be watching to see if it can simultaneously lower subscriber turnover, close the new-subscriber gap with larger rivals Nippon DoCoMo (DCM) and KDDI (Tokyo: 9433), and convince more of its users to upgrade to 3G service, which would result in higher revenue per user. Softbank's fixed-line telephone and broadband units also face intense competition as industry giant Nippon Telegraph & Telephone (NYSE:NTT) is expanding its very popular advanced fiber-optics services.

Comment: Softbank announced quarterly earnings after Tuesday's market close. Its shares rallied along with the broader market in afternoon trading today to close up 4.8% at 2,285 yen ($19.93). A Yahoo! Finance Japan article reports that UBS lowered its target share price to 2,350 yen ($20.50) from 3,200 yen while maintaining its "neutral-2" rating. Both Merrill Lynch and Goldman Sachs are said to be maintaining their "sell" ratings. Mizuho Securities showed some optimism in its report on Softbank, citing positive fundamental earnings and thus, is maintaining its 2,800 yen ($24.42) target and "2" rating. Softbank's over-the-counter traded shares closed at $19.10 yesterday on very light volume.