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SoftBank charges ahead with investment as mobile IPO nears

Expected $22bn in proceeds to help CEO Son pursue AI

SoftBank Group CEO Masayoshi Son speaks during news conference in Tokyo on Oct. 4, 2018.   © Reuters

TOKYO -- The expected listing by SoftBank Group's mobile unit in the coming weeks will mark a critical step that frees the parent to focus on growth as an investment company amid CEO Masayoshi Son's push to develop AI operations around the world.

The Tokyo Stock Exchange is set to approve on Monday the initial public offering of SoftBank Corp. This will be one of Japan's biggest IPOs yet, with proceeds expected to reach around 2.5 trillion yen ($22 billion). The parent, which now owns virtually all of SoftBank Corp., will still hold a stake of 60% to 70%.

One key purpose of the IPO is enabling the parent to morph into a full-fledged investment company. Son's main concern of late has seemed to be the search for promising investment targets in artificial intelligence.

SoftBank has been regarded as a telecommunications company focused on mobile for only a decade or so of the company's 35-year history, he has noted.

The most potent symbol of the transformation into an investment company is likely the SoftBank Vision Fund, announced in 2016 with a Saudi Arabian sovereign wealth fund in order to manage up to $100 billion in assets. Around half of SoftBank's record six-month operating profit of 1.42 trillion yen reported on Monday came from the Vision Fund. And Son is confident about further profit growth. "Next year, we will far exceed the scale we are seeing this year, and maybe a scale never experienced before in Japan," he said.

Another important purpose of the IPO is to strengthen group finances. When the mobile unit goes public, the parent will share profits from the business with stockholders outside SoftBank. Still, the sizable proceeds from the IPO will help fund its global investments.

The money raised will help accelerate investment by the Vision Fund and repay the group's net interest-bearing debt of more than 13 trillion yen. SoftBank is to repay 2.15 trillion yen by fiscal 2021 for bond redemption alone. The IPO "provides for greater flexibility in finances, and the company will be able to venture into bolder investment," a fixed-assets analyst at a securities brokerage said.

The mobile unit IPO is the culmination of the business grouping strategy, a SoftBank official said. The company positions the unit as one of the key pillars around which to build its group operations -- along with Yahoo Japan, British semiconductor design house Arm, U.S. mobile carrier Sprint and the Vision Fund. The mobile unit's listing is seen as a way to encourage it to grow independently, much like Yahoo Japan and Sprint.

SoftBank sees key group businesses tapping technologies of Vision Fund targets to add value to their services. Yahoo Japan's mobile payment service, for instance, uses technologies from India's Paytm, in which the Vision Fund invests.

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