SoftBank’s ties to Saudi Arabia aren’t the only big problem facing CEO Masayoshi Son right now.
The risk of a price war in Japan is threatening the tech tycoon’s plan to raise billions of dollars by spinning off the conglomerate’s mobile business.
The IPO is a key part of Son’s efforts to reposition the group as a global tech investor.
Rival wireless operator NTT Docomo (DCMYY) announced late Wednesday that it will slash prices for its cellphone plans by as much as 40% from April 2019. The move follows pressure from the Japanese government, which thinks the country’s operators charge consumers too much.
Analysts expect SoftBank (SFTBY) and Japan’s other big mobile player, KDDI (KDDIF), to respond with big price cuts of their own. SoftBank’s stock plunged 8% in Tokyo on Thursday, while shares in NTT Docomo and KDDI both plummeted around 15% on fears a price war could hit all of their profits.
SoftBank said it’s “constantly studying” its price plans “in consideration of the competitive environment and consumers’ needs.” A KDDI spokesperson said the company had no plans to match NTT Docomo’s hefty price cut.
Darkening mood
Son is hoping to sell shares in SoftBank’s mobile business in an IPO in the coming months. Doing so would effectively split SoftBank in two, allowing investors to choose between its mobile unit and its investment business, which includes a big stake in Chinese internet company Alibaba (BABA).
Amir Anvarzadeh, a Japan equity strategist at investment firm Asymmetric Advisors in Singapore, thinks the spinoff plan could now be “in jeopardy.”
If the mobile listing does go ahead, investors may expect to pay less for the shares because of the threat to the unit’s profits.
“The mood is darkening” around the mobile business, Anvarzadeh said.
SoftBank declined to comment Thursday on its IPO plans.
Son has turned himself into a kingmaker in the global tech industry after launching the $93 billion Vision Fund last year, with nearly half the cash coming from the Saudi government. The fund has made big investments in dozens of startups such as WeWork and Slack.
SoftBank has also poured money into high-profile tech companies like Uber and its Chinese rival Didi Chuxing.
Selling shares in the mobile division would raise billions of dollars for Son to hunt down more major deals.
But he has been making headlines for the wrong reasons in recent weeks as international pressure on Saudi Arabia has intensified over the killing of prominent journalist Jamal Khashoggi.
Son has previously said he wants to launch a new Vision Fund every two to three years. But he may have to find new benefactors, as Silicon Valley may be less eager to take cash with Saudi ties following the Khashoggi scandal.
