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SoftBank : Japan Cell Outage Dims View of SoftBank IPO

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12/07/2018 | 03:48am EDT

By Mayumi Negishi

TOKYO -- SoftBank Group Corp.'s Japanese mobile unit suffered an hourslong nationwide network breakdown Thursday, tarnishing the unit's planned $23 billion initial public offering later this month.

Television footage showed long lines forming at phone booths during the four-and-a-half hours that the network went down at Japan's third-largest carrier.

The network failure, which began Thursday afternoon local time and was resolved by the evening, arose because of a software glitch that affected Ericsson telecom equipment world-wide, SoftBank said.

A spokesman for Ericsson, which competes with Huawei Technologies Co. and Nokia Corp., said the Swedish firm will be working with SoftBank to prevent a recurrence.

Telefonica's O2 also reported network outages that affected customers in Britain on the same day.

The SoftBank IPO -- which is expected to approach the $25 billion record set by Alibaba Group Holding Ltd. in 2014 -- was fully subscribed on strong demand from Japanese retail investors, including an overallotment of extra shares, a person familiar with the matter said.

SoftBank is aiming for a dividend yield of nearly 5%, based on the net profit at the mobile unit last fiscal year. That is an alluring offer when most bank deposits in Japan pay virtually zero interest.

But the unit faces challenges beyond Thursday's breakdown, including pressure to slash phone charges. SoftBank's two main rivals plan to reduce charges by as much as 40%.

SoftBank is paring back its mobile-carrier holdings as Chief Executive Masayoshi Son focuses on running the Saudi-backed technology-focused Vision Fund, which last month said it secured more capital commitments to bring its total war chest to $98 billion. The Vision Fund has invested in some of the world's most valuable startups including WeWork Cos. Inc.

SoftBank plans to give up control of U.S. carrier Sprint Corp. if regulators approve T-Mobile US Inc.'s acquisition of a controlling stake in Sprint. Meanwhile, the Dec. 19 IPO in Tokyo means the SoftBank parent will give up more than one-third of its Japanese mobile unit while raising some Yen2.65 trillion ($23 billion).

Shares of SoftBank Group shed 4.9% in Tokyo Thursday. Analysts said the high interest among retail investors in the mobile unit could cannibalize demand for the parent's shares. About 90% of the IPO shares will be offered in Japan.

Also weighing on SoftBank was the arrest in Canada of the chief financial officer of SoftBank supplier Huawei for alleged violations of Iran sanctions.

SoftBank is conducting tests of high-speed networks with Huawei, using the Chinese telecom equipment maker's lower-cost products to keep pace with network upgrades by bigger carriers NTT Docomo Inc. and KDDI Corp. It also faces pressure from Japanese e-commerce company Rakuten Inc., which is preparing to enter the market with low-cost services.

Write to Mayumi Negishi at mayumi.negishi@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
NOKIA OYJ -2.01% 5.47 Delayed Quote.10.97%
SOFTBANK GROUP CORP -0.36% 10970 End-of-day quote.56.60%
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Financials (JPY)
Sales 2019 9 478 B
EBIT 2019 -
Net income 2019 1 223 B
Debt 2019 10 568 B
Yield 2019 0,40%
P/E ratio 2019 9,83
P/E ratio 2020 8,67
EV / Sales 2019 2,39x
EV / Sales 2020 2,41x
Capitalization 12 118 B
Duration : Period :
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Technical analysis trends SOFTBANK GROUP CORP
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 13
Average target price 13 751  JPY
Spread / Average Target 25%
EPS Revisions
Masayoshi Son Chairman, President & Chief Executive Officer
Raul Marcelo Claure Chief Operating Officer & Director
Norikazu Oba Manager-Finance & Planning
Tadashi Yanai Independent Outside Director
Ken Miyauchi Representative Director & Vice President
Sector and Competitors
1st jan.Capitalization (M$)
CHINA MOBILE LTD.17.26%226 918
AT&T7.50%223 491
NTT DOCOMO INC2.33%75 270
T-MOBILE US14.12%61 718
KDDI CORP-4.32%57 631