SoftBank Without Telcos Means Masayoshi Son Has Little to Offer

(Bloomberg) -- Finally. 

Get used to hearing that word a lot when people talk about the merger of Sprint Corp. and T-Mobile US Inc.

For SoftBank Group Corp. and its founder Masayoshi Son, that sigh of relief also needs a rejoinder: now what?

In addition to dumping successfully selling his unprofitable U.S. telco, Son this year is on track to list the company's far more lucrative Japanese domestic mobile operator. 

SoftBank Corp., as the local telco is known, accounted for 35 percent of the group's revenue last fiscal year but 67 percent of operating income. Sprint contributed 39 percent of sales, and 17 percent of operating profit.

With T-Mobile chief John Legere running the combined U.S. businesses, SoftBank gets reduced not only to being a mere 27 percent shareholder but to having a limited, if any, operational role. Carving out the Japanese business won't be as stark, but the unit is required to prove its independence in order to be listed on the Tokyo Stock Exchange.

Marcus Ashworth and Shuli Ren have both written about the efforts SoftBank Group has gone through to make this happen, including treating bondholders like dirt and throwing some under the bus to buy back debt and skirt covenants linked to credit ratings.

When both transactions are completed, SoftBank Group will no longer be operating any telephone companies. It'll own a quarter of a U.S. business and around 70 percent of a Japanese one.

What's left over will be a collection of holdings that look a lot like the investment pool Masa launched last year called SoftBank Vision Fund. Among the largest interests will be Yahoo Japan Corp., in which it holds a 43 percent stake, a handy 4.8 percent slice of Nvidia Corp., and 29 percent of Alibaba. Bear in mind, this isn't shares in the highly liquid New York-listed Alibaba Group Holding Ltd., but the golden handcuffs of the Chinese-registered entity.

There's also ARM Holdings Plc, a large chunk of which was given over to the Vision Fund as part of SoftBank's contribution to the $92 billion pot of money.

Save for ARM, and unprofitable electronics distributor BrightStar Global Group Inc., most of SoftBank Group's major holdings are in listed companies. That means SoftBank shareholders can not only buy in directly, but they can cash out at will without having to bother with Masa, the group, or its billions of dollars in debt.

Masa fans may point to some magical power that makes the billionaire still worth the bet, but there's a lack of data to back up that thesis. Certainly not enough to make the risks worth the reward.

So, yes, Masa finally pulled off the Sprint/T-Mobile deal. But get used to hearing the rejoinder. 

To contact the author of this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.net.

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