SoftBank is starting to look a lot like a private equity firm

The Vision Fund, which CEO Son formed last year, will hold investments in the world’s most influential technology companies

By BLOOMBERG

TOKYO • SoftBank Group Corp’s metamorphosis into an investment company is becoming clearer.

The Japanese telecommunications provider and technology investor said operating profit rose 49% to ¥715 billion (RM26.11 billion) in the three months ended June. That was fuelled mainly by investment gains, including a ¥245 billion boost from its Vision Fund and ¥161 billion from the sale of subsidiary Arm Holdings plc’s Chinese unit. Revenue was ¥2.27 trillion.

Underscoring CEO Masayoshi Son’s (picture) change in focus, SoftBank is on track to separate its mobile operations, with the planned initial public offering (IPO) of its domestic wireless business and sale of US unit Sprint Corp to T-Mobile US Inc.

The Vision Fund, which Son formed last year with almost US$100 billion (RM408 billion) from big backers, including Saudi Arabia and Apple Inc, will hold investments in the world’s most influential technology companies. Son is betting on a future of robotics, artificial intelligence (AI) and disruption in older industries.

“Son today talked about his strategy of investing into companies that will profit from the impact of AI — that will probably happen five to 10 years from now, and that’s when it will be reflected in SoftBank’s share price,” said Hideki Yasuda, an analyst at Ace Research Institute. “But there are more immediate investments that are already showing results, and that’s something investors have to start taking into account.”

The Vision Fund portfolio ranges from ride-hailing companies, digital payments and satellites to semiconductors, agriculture and cancer detection.

The fund’s contribution in the first quarter was mainly due to a valuation gain from the planned sale of Flipkart Online Services Pte Ltd, the leading Indian e-commerce player, to Walmart Inc, and an increase in fair value of WeWork Companies Inc.

“The Vision Fund will continue to deliver results every year and increase its value,” Son said at a briefing in Tokyo yesterday. “We are creating a group of the world’s most advanced unicorn companies.”

As Son ramps up his investments, one clue to where he’s looking to deploy the Vision Fund’s cash is in his earnings briefings. His presentations over the past 12 years show how his thinking has evolved, and that his biggest obsession right now is over AI.

“It may look like there is no rhyme or reason, and I’m just making unrelated investments,” Son said. “But there is a unifying reason. It’s AI. AI is coming like a Big Bang. Every industry will be redefined.”

The proposed US$26.5 billion takeover of Sprint by T-Mobile would combine the No 3 and No 4 wireless providers in the US. The two carriers have been pitching their deal as a combination of underdogs trying to better compete against industry giants AT&T Inc and Verizon Communications Inc.

SoftBank is interviewing banks to arrange the IPO of its domestic wireless business and plans to select several lead underwriters as early as August, people with knowledge of the matter have said. Foreign and local investment banks have been making formal pitches to SoftBank over the past few weeks, according to the people.

The company aims for the mobile unit to begin trading in Tokyo in October and the offering could raise more than ¥2 trillion, they said.

Revenue from domestic telecom operations, which include wireless, broadband and fixed-line services, rose 4.6% to ¥880.5 billion in the quarter.

Profit was little changed. SoftBank had 33.6 million mobile subscribers, an increase of 434,000 from the previous quarter.

Earnings from the operations may come under pressure as billionaire Hiroshi Mikitani’s Rakuten Inc plans to become the country’s fourth major mobile-phone operator. Son, whose acquisition of Vodafone’s Japan business in 2006 was the industry’s biggest shakeup in recent history, has said he welcomes the competition.

“We have to go beyond being just a carrier in a maturing industry,” Son said. “That’s why we are planning to rapidly increase collaboration with the Vision Fund.”