Softbank Group Corp yesterday reported that net profit plunged 39 percent in the first quarter, following gains in the same period last year related to the merger of T-Mobile US Inc and Sprint Corp.
Net profit in the three months to June was ￥761.5 billion (US$6.9 billion), the Japanese conglomerate said, compared with ￥1.26 trillion in the same period in the previous financial year.
The merger of US telecoms T-Mobile and Sprint — formerly controlled by Softbank Group — was completed in April last year, releasing ￥734.5 billion in net income, Softbank said in a statement.
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Softbank Group has poured money into some of Silicon Valley’s biggest names and hottest new ventures, from artificial intelligence to biotechnology through its US$100 billion Vision Fund.
Last financial year, the telecom turned investment behemoth reported Japan’s biggest-ever net profit thanks to rallies in technology shares as people moved their lives online during the COVID-19 pandemic, but Softbank’s investment approach means large transactions can cause unpredictable fluctuations in its results, Moody’s Investors Service vice president and senior credit officer Mariko Semetko said.
“Last year’s record high follows the previous year’s record loss, and signifies the highly volatile nature of the company’s business,” Semetko said. “The company has a very fluid and complex capital structure, and unlisted investments and private financings that have limited transparency and are frequently collateralized.”
“Its investment approach results in high governance risks,” she said.
In the 2019-2020 financial year, Softbank reported a net loss of ￥961.6 billion — its worst ever — as the start of the pandemic compounded woes caused by its investment in troubled office-sharing start-up WeWork, but it quickly returned to profit as the impact of COVID-19 lockdowns worked largely in its favor.
Softbank Group shares closed up 0.90 percent at ￥6,831 in Tokyo trading yesterday.
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