Japan's SoftBank steps closer to transformation with mammoth mobile IPO

14 November, 2018, 22:26 | Author: Sammy Rose
  • A journalist raises her hand to ask a question to Japan's Soft Bank Group Corp Chief Executive Masayoshi Son during a news conference in Tokyo

SoftBank Group Corp.'s mobile phone unit said Monday that it will be listed on the Tokyo bourse next month, as its parent company seeks to raise up to 2.6 trillion yen ($23 billion) by offering the mobile unit's shares in what could be the biggest-ever initial public offering in Japan. Softbank's telecom and mobile operation has always been the company's bread and butter, and spinning it off will give Son room to further position himself as a tech kingmaker.

"By spinning off the mobile unit, we have a company with relatively stable cash flow on one hand and a big private equity fund on the other", said a top executive at one of SoftBank's major creditor banks. The company needs to cut down mobile bills to comply with new government requests.

The final IPO price will be determined on December 10, and SoftBank will list on the Tokyo Stock Exchange on December 19 with an initial market value of ¥7.18-trillion - about ¥1-trillion above that of rival KDDI, which has about 10-million more subscribers. Citing the prospectus, Bloomberg said the company will offer 1.6 billion shares at 1,500 yen a piece, or roughly $13. Japanese households are commonly seen as an attractive target in IPOs with their 1,829 trillion yen in financial assets, even if they are traditionally risk-averse with over 50 percent of assets in cash and deposits.

"The dividend payout ratio is very high", said Masahiko Ishino, an analyst at Tokai Tokyo Research Center.

Banking industry sources have said SoftBank's wide brand recognition should also prove popular with individual investors, including those new to stocks. SoftBank's bets so far have been as varied as small gaming startups, ride-hailing firms such as Uber Technologies, and e-commerce behemoth Alibaba Group Holding.

Investors have grown nervous about the lack of clarity in some of the investments by the $90bn Vision Fund.

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After the public listing, Softbank Group, the parent, is to hold about 63 percent of the wireless unit.

SoftBank has nearly 34 million wireless subscribers in Japan.

SoftBank forecasts that the domestic telecoms operations, which include wireless, broadband and fixed-line services, will post 700 billion yen in annual operating profit.

SoftBank is known for its investments in tech, many of which are done through its Saudi-backed Vision Fund.

Earlier this month, Son condemned the killing but said he would continue to do business with Saudi Arabia.

The total size of offering could rise by 240.6 billion yen if an overallotment is exercised, taking the total fundraising closer to the $25 billion that Alibaba Group Holding Ltd raised in 2014 in the world's biggest-ever IPO. SoftBank will maintain at least 60% ownership of the domestic telecom business.

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