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SoftBank

SoftBank and Oyo Japan work together 'seriously' to turn profit

'We are more involved' to put hotel startup on track, mobile company's CEO says

An Oyo hotel room in Noida, near New Delhi (Photo by Akira Kodaka).

TOKYO -- The head of SoftBank Group's Japanese mobile unit on Friday said it was deepening its involvement in Indian startup Oyo's hotel business in Japan, with a focus on profitability.

SoftBank has a 25% stake in Oyo Hotels Japan, the Japanese joint venture. Since its launch last year, the business has been hit by disputes between hotel owners and a significant shortfall in its sales target.

"[Oyo's leadership] was so intensely aggressive that there was some misunderstanding with the hotel owners," Ken Miyauchi, CEO of the unit, SoftBank Corp, explained at an earnings conference in Tokyo.

"If we work together, more steadily and even conservatively, it could turn a monthly profit next fiscal year. We are strengthening governance and working together seriously."

Miyauchi said Oyo had "problems" with about 40 of its roughly 200 hotel contracts, and admitted that they stemmed from Oyo's minimum guarantee, a perk in which Oyo pays hotel owners for shortfalls in revenues agreed in the contract. It helped lure hotel owners, but Miyauchi indicated that there had been disputes over what the actual revenue figure was.

Contracts have been overhauled, and Miyauchi said "all negative factors" could be contained within two to three months. "I think we can certainly put Oyo Hotels on track. We are more involved."

The focus on profitability is already evident in a slower pace of expansion. Oyo signed up 5,762 rooms in Japan as of December, according to a presentation by SoftBank, compared with 5,200 rooms in October. Oyo had initially targeted 75,000 rooms, according to sources.

While the measures are only for Japan, SoftBank's move offers a glimpse of how its parent, SoftBank Group, is dealing with turmoil at some of its investment targets. After a significant financial injection from SoftBank, Oyo quickly expanded across 80 countries, but recently began cutting employees in a bid to turn a profit.

The high-profile issues at Oyo have become a drag on SoftBank's mobile unit, which otherwise reported strong earnings on Friday thanks to a growth in subscribers and a solid enterprise business. It upgraded its operating profit forecast for the current fiscal year by 10 billion yen ($91 million) to 900 billion yen, up 10% from the previous year.

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