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SoftBank Q3 Profit Slips, Dragged Down by Sprint Costs

Profit-sapping competition is making Sprint's turnaround tough.

Japan’s SoftBank said third-quarter operating profit slid nearly 6 percent, missing estimates, as the ambitious mobile telecom firm continues to soak up the cost of trying to turn around loss-making U.S. unit Sprint.

SoftBank, which launched a surprise takeover of the No. 3 U.S. carrier for more than $20 billion in 2012, said on Tuesday its October-December operating profit was 191.4 billion yen ($1.6 billion), down from 203.4 billion yen a year ago. That trailed the 219.1 billion yen average of five analysts’ estimates compiled by Thomson Reuters StarMine.

Sprint, 80 percent-owned by SoftBank, is now locked in intense, profit-sapping competition with larger rivals AT&T and Verizon. SoftBank bought the business to expand outside Japan’s sluggish economy, but Sprint has undergone a long-haul revamping of its network, shedding thousands of jobs and triggering a mass exodus of subscribers.

“Overall, SoftBank is doing well, but with Sprint … being in a tough situation, I think it will have a long battle to fight,” Masayoshi Son, chief executive of Japan’s third-biggest mobile carrier by subscriber numbers, told reporters in Tokyo.

Earlier this month, Sprint reported revenue for the quarter ended December that fell less than expected as it lured more subscribers by cutting prices and offering promotions. Still, Sprint’s net loss more than doubled to $2.38 billion.

In Sprint’s latest turnaround gambit under Marcelo Claure, installed as new chief executive by SoftBank six months ago, the mobile carrier will significantly increase its retail presence through a deal to take over as many as 1,750 stores being sold by electronics retailer RadioShack after it filed for U.S. bankruptcy protection.

SoftBank, which didn’t comment on the RadioShack deal on Tuesday, booked third-quarter costs including 29.5 billion yen to cover severance payments associated with Sprint job cuts. In the same period a year earlier, the comparable figure was 5.34 billion yen.

Still, it kept its operating profit forecast for the fiscal year ending March unchanged from 900 billion yen, having cut the target 10 percent in its last quarterly report, citing Sprint costs. SoftBank’s third-quarter net profit fell sharply to 32.3 billion yen from 93.8 billion yen a year earlier, when it was boosted by one-off gains.

Son’s message on Sprint was broadly unchanged from the previous quarter, underlining the extent of the task in ending losses at the company.

Sprint’s latest quarter included a $2.1 billion non-cash impairment charge, which SoftBank earlier this month said it would not recognize in its consolidated financial statements because of differing accounting standards.

(Editing by Kenneth Maxwell)

This article originally appeared on Recode.net.

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