Softbank sinks into quarterly loss on costs related to Internet services, slower handset sales

By Yuri Kageyama, Gaea News Network
Thursday, April 30, 2009

Softbank sinks into loss on Internet service

TOKYO — Softbank Corp., Japan’s third-biggest mobile carrier, said Thursday that it sank into a loss in the fiscal fourth quarter on one-time costs, including launching a superfast Internet service.

Softbank reported a net loss of 15.01 billion yen ($154.3 million) for the January-March period, a reversal from the 15.4 billion yen it earned the same period the previous year.

Quarterly sales dipped 3.7 percent to 690.8 billion yen as an ongoing recession cut into handset sales.

Softbank has been more successful than its rivals, NTT DoCoMo and KDDI Corp., in wooing people to its cell phone services for 23 straight months through March with discounts and by being the exclusive local carrier for eye-catching handsets like Apple Inc.’s iPhone.

But it has yet to translate its aggressive marketing campaigns, such as the TV ads featuring a popular talking white dog, into solid profit gains.

But Chief Executive Masayoshi Son said his company was doing well in its core business, racking up the fourth straight record operating profit in the fiscal year through March. Softbank is now moving into a stage of delivering solid profits after a decade of shaky profitability caused by aggressive investments into emerging Internet businesses.

“We believed we had to plant big seeds for the business model in Japan, the U.S. and Asia,” he told a news conference carried live on the Internet.

Softbank, now with about 20.6 million subscribers, controls about 19.2 percent of the nation’s market, up 1.1 percentage points from the previous fiscal year. But average sales per user declined for voice calls, while they were up for data transmission.

Losses on investments from the market downturn dragged on its earnings, according to Softbank, which bought British cellular giant Vodafone Group PLC’s struggling Japanese operations in 2006.

A major one-time loss related to payments for bonds for its mobile unit as well as a write-off for its optical fiber Internet services, also hurt results, it said.

One business area that performed better than last year was its Internet-related “cultural” businesses such as advertising, Internet shopping and auctions, Softbank said.

Softbank also introduced attractive mobile content such as video of comedy acts popular in Japan called “S-1 Battle,” and easy-to-use applications called “mobile widget.”

For the fiscal year ending March 31, Softbank’s profit dropped 60.3 percent to 43.2 billion yen, on 2.67 trillion yen in sales, down 3.7 percent on year.

Softbank did not give a net profit forecast, but expects operating profit for the fiscal year ending March 31, 2010, to rise 17 percent from the fiscal year just ended to 420 billion yen.

Defections from rivals to Softbank accelerated since Japan adopted “number portability” late 2007, which allows people to switch carriers without changing phone numbers.

But all carriers have been forced to lower their fees amid intense competition. Some discounts being offered require people to use the same handset for some time, and that has discouraged machine upgrades.

Softbank shares gained 3.4 percent to 1,550 yen in Tokyo. Earnings were released after trading ended on the Tokyo Stock Exchange.

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