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iPhone Boom Helps Softbank Swing To Net Profit

iPhone Boom Helps Softbank Swing To Net Profit

Softbank Corp. (9984.TO) said Tuesday that healthy demand for Apple Inc.’s iPhone helped it swing to a fiscal fourth quarter net profit but that costs of tidying up the remnants of its old school 2G operations weighed on its bottom line.

Japan’s third largest mobile phone carrier by subscribers racked up a Y1.85 billion net profit in the January-March quarter and an operating profit of Y99.55 billion. The company attributed the wide gap between the net and operating profit figures to a special loss related to its shift away from its now-extinct 2G mobile phone service.

The fourth quarter net profit was a reversal from the net loss of Y15.01 billion it posted in the same period a year earlier due mainly to expenses related to the redemption of bonds inherited during its acquisition of Vodafone Group PLC’s Japanese operations.

The iPhone has proved to be a major selling point for Softbank’s mobile services as the company struggles alongside its competitors in coping with falling phone call revenue.

Japan’s cellphone carriers have been locked in fierce battle for customers and declining per-user revenue is a common challenge facing most players. As users spend less time and money on phone calls, carriers are struggling to find ways to enhance data communication revenue.

Bucking this trend, Softbank’s average revenue per user rose to Y3,890 in the January-March quarter from Y3,830 a year earlier. This compares with rival KDDI Corp. (9433.TO), where average revenue per user dropped to Y5,000 from Y5,500 in the same period.

At a press conference for the company’s earnings, President Masayoshi Son acknowledged the crucial roll that the iPhone will play in the company’s expansion.

“The iPhone is central to our strategy to lead the mobile Internet scene,” he said.

Son added he expects continued growth in the number of subscribers, and that the iPhone and other high-revenue handsets should translate the subscription growth into solid earnings.

A study released last week by local thinktank MM Research Institute showed that the iPhone accounted for 72.2% of 2.34 million smartphones shipped in Japan in the year through March.

While rival carriers are also releasing smartphones, Son said he expects the iPhone’s sales to remain strong this fiscal year. For the full fiscal year ended March, Softbank’s net profit more than doubled to Y96.72 billion from Y43.17 billion, while operating profit rose 30% to Y465.87 billion. Revenue was up 3.4% at Y2.763 trillion. The company added about 1.24 million subscribers on a net basis.

For the current fiscal year through March 2011, Softbank expects Y500 billion in operating profit, up 7.3%. The company didn’t disclose a net profit outlook.

Softbank will also lift its capital investment to Y400 billion this fiscal year from Y222.9 billion last fiscal year.

Son noted that the company’s stronger-than-expected free cash flow has given it room for more capital spending.

Part of the additional investment will be for offering services in the newly approved frequency spectrum, while the company will also invest in larger data transmission capacity to accommodate increased data traffic.

Even with the expected growth in fixed costs, “I’m confident that we can meet the (Y500 billion) operating profit target,” said Son.

Softbank reports its earnings under Japanese accounting standards.

 -By Juro Osawa, Dow Jones Newswires; 813 6269 2794; juro.osawa@dowjones.com

[Thanks: http://online.wsj.com]

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