Japan’s Softbank plans to buy back up to Y500bn (US$4.4bn) of its own shares in what will be its largest ever repurchase. The move can be considered a further show of confidence in both itself and debt-laden US mobile subsidiary Sprint, which Softbank CEO Masayoshi Son has said is showing signs of a turnaround.
Japan’s Softbank (TYO:9984) plans to buy back up to Y500bn (US$4.4bn) of its own shares in what will be its largest ever repurchase.
The telecoms and internet giant announced today that it will buy back up to 167 million, or 14.2%, of its shares between 16 February 2016 and 15 February 2017.
The aim of the transaction is to “exercise agile management of capital policy corresponding to any changes of business environment,” the Tokyo-based company said.
Softbank, the largest shareholder in US cellco Sprint (NYSE:S), said the repurchase will be funded with proceeds from asset sales and cash on hand, but not debt. The company noted that, together with its subsidiaries, it received about Y300bn (US$2.6bn) from sales of investment securities and dividends over the past year.
A Softbank spokesperson has been cited saying the company has not yet decided which assets it will sell to fund the repurchase, noting that it possesses Y.75trn (US$66.2bn) worth of listed securities.
High debt levels and concerns over Sprint’s ability to compete in a highly competitive market have weighed on Softbank’s share price.
However, amid signs of a turnaround in Sprint’s business last August, Softbank embarked on a near-US$1bn share buyback plan, also raising its stake in the US telco from slightly under 80% to about 82% in a show of confidence.
Speaking during the Softbank’s earnings call last week, CEO Masayoshi Son (pictured) said he saw signs of a turnaround at Sprint, which reported a net loss of US$836m for the third quarter of 2015.
Softbank has said Sprint aims to return to a growth trajectory by turning around its declining sales trend while cutting costs and improving liquidity.
The company said in a statement on its results for the nine months ended 31 December 2015 that Sprint had increased its subscriber numbers over the past two quarters and is on track to reducing operating expenses by US$1.5bn in the fiscal year ending March 2016.
During Q3 2015, Sprint completed two key transactions designed to improve its liquidity. The US cellco carried out its first sale-and-leaseback deal via its new leaseco, Mobile Leasing Solutions, which provided a US$1.1bn cash infusion, and amended an existing receivables facility to include the sale of certain future lease receivables, thereby increasing the maximum funding from US$1bn to US$4.3bn.
Sprint expects to execute future transactions via the leaseco on an approximately quarterly basis, raising US$3bn to US$4bn in fiscal 2016, depending on the number of lease sales to customers.
The US cellco is also creating a network-related financing entity that it says could provide US$3bn to US$5bn in incremental funding in the 2016 fiscal year.
Sprint also plans to overhaul its network with a focus on cost-effective densification, deploying fibre and wireless backhaul.
Softbank reported an operating profit of Y189.6bn (US$1.6bn) for Q4 2015 and revenue of Y2.39trn (20.9bn).
