and Japan’s other top mobile carriers tumbled Thursday on fears that government pressure to lower fees would curtail profit growth in one of the world’s most lucrative mobile markets.
By hobbling a core engine of SoftBank’s global investment machine, fee cuts could spill into a realm that includes the world’s most valuable startups.
SoftBank was already under pressure from political turmoil in Saudi Arabia, whose government is the main backer of the nearly $100 billion SoftBank Vision Fund. Many U.S. and European business leaders backed out of a Saudi investment conference in October led by Crown Prince Mohammed bin Salman after journalist Jamal Khashoggi was murdered in the kingdom’s consulate in Istanbul. SoftBank Chief Executive Masayoshi Son met the crown prince during the conference but canceled a speaking appearance.
SoftBank has pegged its investments in internet companies such as Uber Technologies Inc. as its main source of growth, while milking the profits from its position as one of Japan’s three main providers of mobile-phone service. SoftBank also has said it plans to list the Japanese mobile business on the Tokyo Stock Exchange, a move that would help it raise funds for its global investments and limit dependence on Middle Eastern investors.
The profitability of that business is now in question after Japan’s biggest carrier,
bowed to government pressure and said this week it would lower its fees by as much as 40%. No. 2 carrier
said it would study price cuts as well.
The price cuts were in response to monthslong criticism from Japan’s government. Chief Cabinet Secretary Yoshihide Suga in August slammed carriers for their big annual profits, saying Japan’s top mobile-phone carriers can lower fees by about 40%. A government study showed some representative monthly smartphone-user fees in Tokyo were at least 50% higher than in London or in Paris.
On Thursday, NTT Docomo shares fell nearly 15%, KDDI fell more than 16% to a four-year low and SoftBank shares fell more than 8%, collectively wiping out ¥3.5 trillion ($31 billion) in market value.
SoftBank hasn’t announced price cuts yet, but it is likely to be compelled to respond to cuts by its two rivals, which control three-quarters of Japan’s saturated mobile-phone market.
“You’d have to be more skeptical about the SoftBank unit’s growth prospects,” said Naoki Fujiwara, an asset manager at Shinkin Asset Management.
“We are constantly studying prices, based on the competitive landscape and consumer needs, and will continue to do so,” said Daisuke Muranaga, a spokesman for SoftBank’s Japanese cellphone business.
SoftBank has told bankers it hopes to raise more from the listing of its Japanese mobile business that
did with its initial public offering, a person familiar with the discussions said. The Chinese e-commerce giant raised $25 billion.
Financing has been a chronic headache for SoftBank, whose bonds carry a junk-level rating. Mr. Son, the chief executive, has repeatedly bemoaned missed investment opportunities because of SoftBank’s inability to get financing. He has said the Vision Fund would allow the company to invest without further debt.
SoftBank is still sitting on large gains from investments, such as its stake in Alibaba. However, those gains aren’t always easy to turn into cash. Mr. Son has said he hopes to launch sequel Vision Funds of about $100 billion each.
This week, SoftBank and Deutsche Telekom AG, the controlling shareholders of Sprint and T-Mobile, respectively, each approved the proposed merger of the two U.S. carriers. U.S. antitrust authorities are reviewing the more than $26 billion deal and aren’t expected to issue a decision until next year.