Daily Management Review

$4.4 Billion Share Buyback Announced by SoftBank


$4.4 Billion Share Buyback Announced by SoftBank
In what is the biggest repurchase ever, Japan’s SoftBank Group Corp. announced it would buy back up to ¥500 billion ($4.4 billion) of shares on Monday. This move helped to bolster a share price beaten down by worries about U.S. mobile subsidiary Sprint Corp.
14.2% of the Japanese telecommunications and Internet giant’s shares are tp be repurchased as part of the buyback. In August a temporary rise in its stock price resulted when the company had announced a share buyback valued at ¥120 billion.
“It gives a favorable impression that SoftBank is conscious about its shares. But essentially SoftBank and Sprint will need to show concrete accomplishments to gain the trust of investors,” said Satoru Kikuchi, an analyst at SMBC Nikko Securities.
There were signs of a turnaround at Sprint, which SoftBank bought for $22 billion in 2013, said the Chief Executive of SoftBank Masayoshi Son at the announcements of the company’s latest earnings and results. Increasing its overall subscriber numbers while cutting costs, Sprint showed some signs of progress in the most recent quarter, after several quarters of difficulties.  
Softbank’s share purchase would be funded through proceeds from the sale of assets and cash on hand and the process would take place over a year, starting Tuesday.
SoftBank possessed listed securities valued at ¥7.5 trillion ($66.2 billion) but the company has yet to decide which of its assets it would sell to fund the buyback, said a spokeswoman of the company. Over the past year SoftBank and its subsidiaries received around ¥300 billion from sales of investment securities and dividends, the company said.  
SoftBank and some of its top management have been trying to lift the company’s shares and the buyback is seen as the latest in a series of such efforts. As a show of confidence and calling it a “personal bet”, in August, SoftBank President Nikesh Arora, whom Mr. Son has designated as his heir apparent, agreed to buy ¥60 billion in SoftBank’s shares.
The share prices of SofBank have been falling on concern in part about whether Sprint would be able to pay off its $32 billion in debt. On Monday there was a rise of 5.7% in the share values before the buyback was announced, however the prices at the current level of 4,400 yen ($38.85) are down by more than one-third from a year earlier and are trading near three-year lows.
SoftBank is dedicated to Sprint’s turnaround, Mr. Son has maintained. SoftBank has created a phone-leasing company to help cut Sprint’s equipment costs and has increased its stake in Sprint to show its commitment.
The operating profit of the company rose 7% in the three months through Dec. 31, to ¥189.6 billion, on a 4% increase in revenue, to ¥2.39 trillion.