Ain’t no party like a Softbank party

Not even the end of its relationship with Deutsche Telekom could dampen spirits at the Softbank party, as the team reported $3.46 billion in profit, up 21% year-on-year, for the last quarter.

It’s domestic telecom business was down slightly for the first half of this year, Sprint was actually up compared to the same six month period of 2016, the Yahoo assets were also up, there aren’t any year-on-year stats for ARM just yet and the Softbank Vision Fund also brought in a healthy amount of cash. Aside from a messy break up with Deutsche Telekom, you could say it has been a very satisfactory six months for Softbank.

Talking about the potential Sprint/T-Mobile US merger, lets address the elephant in the room before it starts to get uncomfortable. It’s officially over and there is no going back now.

Softbank and Deutsche Telekom could agree on a number of things, and it is now officially over. Whether it was a disagreement over the controlling voice in the boardroom, or a valuation of the business or maybe there was fear of regulatory resistance to the deal, its off. The rumours were there last week, as were whispers of Softbank dilly-dallying with Charter, but some might have assumed these were mind games by Softbank CEO Masayoshi Son in an effort to gain some sort of advantage in negotiations, but alas no.

What this means for the Sprint business moving forward we’re not too sure. Quite frankly, Sprint needed this deal more than T-Mobile US did. T-Mobile US is a business going stronger every day with a solid network, a good relationship with customers and an agile marketing team, while Sprint is losing market share consistently. Softbank has announced it will increase its stake in the US telco from 83% to 85%, though there needs to be a serious shake up at Sprint if it going to reverse fortunes.

In terms of the financials, Sprint actually had a positive six months if you take it at face value. Sales were up for the six month period, though this is primarily down to a solid first quarter. The company hasn’t had a profitable year in more than a decade, and fortunes are not particularly appealing. Son has a knack of making money so we wouldn’t rule a turnaround out completely, but it will be tough going against the top three who are all heading in the right direction.

And while the consolidation ambitions of the business are not exactly teeming with success for the moment, another difficult issue is starting to appear on the horizon; debt. Roughly half of Sprint’s $38 billion in debt is coming due over the next four years. While a Softbank influenced Sprint might have slowed the mass exodus of customers, investments in the network are badly needed. Add the debt onto network investments, and Softbank might find itself forking out quite a bit of cash to turn this business around.

Looking at other areas, Softbank’s domestic Japanese telco business took a big of pinch on sales, though subscriber numbers are on the increase, for both mobile and broadband, and the churn rate is also heading in the right direction. Discounts for the mobile business have been on the increase over the last six months, which has led to a decrease in both telecom and service ARPUs, explaining the slight difference in revenues.

On a positive note, things seem to be going well at ARM, though comparable statistics from 12 months ago are not available. Next quarter will give a better idea of how the Japanese influence has been received by the chip-maker. Another bright spot is the Softbank Vision Fund, which made gains of roughly $1.7 billion on its investments over the first six months of the year. Makes up for the messy break up we suppose.