SoftBank plans massive IPO for its Japanese telecoms business

A journalist raises her hand to ask a question to Japan's Soft Bank Group Corp Chief Executive Masayoshi Son during a news conference in Tokyo

A journalist raises her hand to ask a question to Japan's Soft Bank Group Corp Chief Executive Masayoshi Son during a news conference in Tokyo

By Pavel AlpeyevSoftBank Group Corp.is seeking to raise 2.4 trillion yen ($21.1 billion) in the initial public offering of its domestic telecom operations scheduled for December 19. The SoftBank founder and CEO is the creator of the $100 Billion Vision Fund, which has been buying large stakes in fast-growing tech companies.

"By spinning off the mobile unit, we have a company with relatively stable cash flow on one hand and a big private equity fund on the other", said a top executive at one of SoftBank's major creditor banks.

A new risk for the business emerged less than two weeks ago: a damaging price war among Japan's mobile operators.

The Japanese technology giant yesterday said in a prospectus that it would sell 1.6 billion shares at ¥1,500 apiece in a new entity called Softbank Corp, which is to start trading in Tokyo on December 19.

SoftBank is wooing individual investors with a pledge to return 85 percent of its income to shareholders.

The domestic and global underwritten offering will include 1.6 billion shares in Softbank Corp sold at a preliminary price of JPY 1,500 each.

Amir Anvarzadeh, a senior strategist at Asymmetric Advisors in Singapore, pointed out the valuation of the business is lower than earlier, bullish speculation that it could be worth 9 trillion yen. That is well above Docomo's around 57 percent payout ratio expected in the current fiscal year and KDDI's 39 percent. "That provides an incentive". SoftBank has also funneled capital into high profile companies like Chinese Internet behemoth Alibaba, as well as Silicon Valley-based ride-hailing industry leader Uber Technologies Inc. and its largest Asian competitor Didi Chuxing.

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Investors have grown nervous about the lack of clarity in some of the investments by the $90bn Vision Fund.

After the public listing, SoftBank Group, the parent, will hold about 63 per cent of the wireless unit. An anonymous source told Reuters that more than 80% of the shares will be offered to domestic retail investors.

SoftBank forecasts that the domestic telecoms operations, which include wireless, broadband and fixed-line services, will post 700 billion yen in annual operating profit.

It has close to 34 million wireless subscribers in Japan.

The IPO will mark the transformation of the parent from a mobile phone network provider - which successfully challenged Japan's incumbent duopoly - into one of the world's biggest technology investors under Chief Executive Masayoshi Son.

SoftBank hopes that putting a value on the telecoms business will help bolster its own share price, which it sees as undervalued. The deal would represent the world's biggest market debut since Alibaba Group (BABA) raised $25 billion for its IPO in NY in 2014.

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