Japan's SoftBank Explores Listing Its Telecom Business -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 16, 2018).

TOKYO -- SoftBank Group Corp. said Monday it may list shares of its profitable Japanese cellphone operator, a move that could raise nearly $20 billion and help SoftBank make big bets on technology companies.

Among multiple ideas under consideration is listing roughly 30% of the cellphone unit on the Tokyo Stock Exchange, as well as a separate listing overseas, possibly in London, a person familiar with the discussions said.

"We are always studying various capital strategy options," SoftBank Group said in a statement. It said the listing was "one such option, but no decision has been made."

SoftBank Group includes well-established cellphone businesses in Japan and the U.S. -- where it controls Sprint Corp. -- and separate operations that make big and risky bets in mostly unproven internet businesses. It manages the world's largest tech investment pool, the $93 billion Vision Fund, which is backed by the sovereign-wealth funds of Saudi Arabia and Abu Dhabi.

SoftBank Group shares closed 3.2% higher in Tokyo trading Monday as some investors welcomed the prospect of raising cash without issuing more debt. The group's total interest-bearing debt has grown fourfold in five years to Yen14.65 trillion ($132 billion), prompting ratings company Moody's Investors Service to give SoftBank bonds a speculative rating.

Markets have been concerned about SoftBank's large debt load when U.S. interest rates are on the rise, said Matsui Securities analyst Tomoichiro Kubota. He said the "key point is how they'd spend" any money raised -- preferably, he said, to pay down debt.

SoftBank's recent investment spree includes spending $7.7 billion to take 15% of ride-hailing firm Uber Technologies Inc. It also has bought stakes in the top ride-hailing apps in China and Southeast Asia.

Analysts value SoftBank's Japanese telecommunications business at around Yen6 trillion to Yen6.6 trillion. Listing 30% of the shares would raise roughly Yen2 trillion ($18 billion), making it one of Japan's biggest public offerings in recent years.

The business is a cash cow, making up nearly half of SoftBank Group's earnings. Three companies -- NTT DoCoMo Inc., KDDI Corp. and SoftBank Corp. -- control almost all of the market.

Still, SoftBank's subscriber growth has slowed since NTT DoCoMo, the market leader, began offering Apple Inc.'s iPhone in 2013. On Monday, as SoftBank responded to the first report of the potential listing in Japan's Nikkei newspaper, it was also holding a press event showing off a line of phones for children and teenagers in a bid to win subscribers back from its two rivals.

SoftBank Group's founder and chairman, Masayoshi Son, has spent less time in recent years on the Japanese cellphone business, SoftBank officials say, because he is busy trying to turn around Sprint in the U.S. and looking for investments for his Vision Fund.

SMBC Nikko Securities analyst Satoru Kikuchi said a separate listing for the telecoms unit could give it more autonomy and allow it to make investments on its own terms rather than competing with Mr. Son's other priorities.

Although Mr. Son has borrowed heavily in Japan, where the central bank has kept interest rates exceptionally low, he has felt he is nearing the limits of what he could procure through issuing debt, people familiar with the matter said. One of the reasons SoftBank decided to form the Vision Fund was to allow it to continue to invest without raising its leverage, Mr. Son has said.

The Tokyo Stock Exchange requires companies listing on its first section to offer at least 35% of their shares to the public, or 30% for the less commonly used second section. However, the exchange has made exceptions to the rules, including in cases where a company's primary listing is outside Japan.

Write to Mayumi Negishi at mayumi.negishi@wsj.com and Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

January 16, 2018 02:47 ET (07:47 GMT)