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SoftBank Q1 Profit Rises as Sprint's Picture Improves

The company also plans a stock buyback as a sign of confidence.

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SoftBank reported an 8 percent rise in quarterly profit as loss-making Sprint fared better than expected, leading the Japanese telecoms conglomerate to declare it was seeing “light at the end of the tunnel” for its U.S. unit.

SoftBank, which bought the U.S. carrier for more than $20 billion in 2013, said on Thursday its April-June operating profit rose to 343.6 billion yen ($2.75 billion) from 319.4 billion yen a year ago.

Sprint has struggled to compete against larger rivals AT&T and Verizon Communications even while it burns through cash trying to acquire and retain customers. But in a sign of possible improvement, Sprint on Tuesday reported a smaller-than-expected quarterly loss and lower churn, or defections.

SoftBank also said it was buying back up to 120 billion yen in shares, a move CEO Masayoshi Son said came from the company’s renewed confidence and belief that its shares were undervalued.

“Repurchasing shares is an effective way of returning profit to shareholders. But it’s also a message from management to markets, regarding the share price,” he told reporters. “We’ve now become fully confident.”

The company did not give an outlook for the full year, but analysts on average have been forecasting 1.04 trillion yen, according to the average of 19 estimates compiled by Thomson Reuters.

Based on such forecasts, SoftBank shares have lately been trading below eight times forward earnings estimates, lagging behind multiples of over 10 for Japanese telecoms rivals KDDI and NTT DoCoMo.

Analysts have said the comparatively low valuations were mainly due to concerns about Sprint’s outlook.

(Reporting by Ritsuko Ando; Editing by Muralikumar Anantharaman)

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