Softbank Group Corp is seeking to raise ￥2.4 trillion (US$21.1 billion) in the initial public offering (IPO) of its Japanese telecom operations next month, raising more capital to fuel investments for its US$100 billion Vision Fund.
The Japanese technology giant yesterday said in a prospectus that it would sell 1.6 billion shares at ￥1,500 apiece in a new entity called Softbank Corp, which is to start trading in Tokyo on Dec. 19.
At the indicated price, the business is being valued at ￥7.18 trillion.
This is Japan’s biggest-ever IPO, topping the listing of the former national carrier Nippon Telegraph & Telephone Corp in 1987.
Softbank founder Masayoshi Son is listing the company’s cash cow to raise capital and keep making investments in tech start-ups.
The offering comes at a time when the wireless unit faces potential pricing pressure. Rival NTT Docomo Inc has announced plans to cut rates 40 percent in response to government pressure to reduce peoples’ telephone bills.
At the same time, Japanese Web retailer Rakuten Inc is jumping into the market as a budget provider.
“Market sentiment is not as good as it used to be, and investor appetite may not be so strong,” said Yasuhide Yajima, chief economist at NLI Research Institute in Tokyo. “Still, their focus is on data, AI and communication — industries where they can anticipate growth, so investors can’t exclude Softbank from their target.”
After the public listing, Softbank Group, the parent, is to hold about 63 percent of the wireless unit.
Softbank is targeting a dividend payout ratio of about 85 percent of net income, according to the filing.
Son has previously said that he was aiming for a higher dividend to provide cash for what has become his main occupation.
“The dividend payout ratio is very high,” Tokai Tokyo Research Center analyst Masahiko Ishino said.
“That provides an incentive” for investors at the IPO, he said. “By the same token, it will also bolster Softbank Group’s finances. Softbank Group is transforming into an investment company and investment companies want higher dividends, so this makes sense.”
The IPO price range is to be set on Nov. 30, followed by the final price on Dec. 10.
Softbank has forecast that the domestic telecoms operations, which include wireless, broadband and fixed-line services, would post ￥700 billion in annual operating profit.
It has close to 34 million wireless subscribers in Japan.
Softbank laid out numerous risks in the prospectus, saying Japan’s mobile and home broadband markets are “approaching saturation.”
It also singled out Suga’s comments this year about forcing carriers to lower rates and cited pressure from Docomo’s decision to slash fees.
“We may not be able to accurately predict, prevent or effectively react to new laws and regulations,” Softbank said in the prospectus. “Our ability to set prices for those services and products could be limited.”
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