TOKYO -- SoftBank Group (SBG) Corp.'s mobile phone unit suffered a setback after it made its debut on the Tokyo Stock Exchange on Dec. 19, as its stock price ended over 14 points below its initial public offering (IPO) price.
Questions have been raised over whether the company will be able to work out a scenario for its growth and meet investors' expectations as the company faces challenges, such as government pressure to lower mobile phone charges, intensifying competition and recent communication trouble that hit its network.
"We made our market debut in a severe environment, but are determined to brace ourselves and start over," said Ken Miyauchi, president and CEO of SoftBank Corp., the mobile phone unit of SBG.
Initially, trading in SoftBank Corp.'s shares began at 1,463 yen per share on Dec. 19, below its IPO price of 1,500 yen. The price kept declining throughout the day to end at 1,282 yen.
A sense of stagnation is prevalent in stock markets because of trade friction between the United States and China and other negative factors. However, skepticism over SoftBank's potential for further growth has been growing in the market, and has apparently lowered its share prices.
Competition is expected to intensify as Rakuten, an e-commerce and internet giant, is set to enter the already saturated mobile phone market. Moreover, mobile phone carriers are under pressure from the government to lower their charges. Under these circumstances, it is difficult for carriers to sustain steady growth.
Even before listing its stock, SoftBank had a series of unexpected problems, including service outages triggered by a glitch in the company's LTE high-speed mobile data network made by Telefonaktiebolaget LM Ericsson, a Swedish communications equipment manufacturer.
Moreover, the government decided to stop its procurement of Chinese communications equipment, including products made by Huawei Technologies Co. Following the move, SoftBank has decided not to use Chinese devices in its next-generation 5G communications system. Instead, the company intends to use more devices made by European and North American manufacturers like Nokia Corp. However, as European and North American devices are more expensive than their Chinese counterparts, SoftBank fears that it will be forced to shoulder an extra financial burden.
Takeshi Minami, a senior researcher at Norinchukin Research Institute Co., has expressed pessimism about the prospects of SoftBank Corp. share prices.
"Investors actively bought shares of SBG, expecting that its top executive Masayoshi Son would do something new. However, the subsidiary is less attractive to investors because the firm is expected to shoulder more costs, such as investments in the 5G system. It's difficult to expect share prices to rise," said Minami.
-- Pursuing growth in cutting-edge fields
While the mobile phone market has matured, SoftBank Corp. is placing its expectations in cutting-edge fields, including the internet of things (IoT) and artificial intelligence (AI).
Currently, IT giants such as Google and Facebook are predominant in the global market for providing online services. When the 5G system is launched in 2020, high-speed and large-capacity platforms with multiple concurrent connections will be developed, which SoftBank officials expect will provide the firm with a great opportunity, and the company is poised to proactively provide new services in cooperation with its parent company SBG.
Pointing out that SBG is actively investing in car dispatch services using AI, Miyauchi said, "Business operators in new fields will use our network and expand their business activities by effectively utilizing our markets and customers."
However, global competition for creating new services using AI and IoT is already intense. Moreover, SBG is saddled with 18 trillion yen in interest-bearing debts because it has made massive amounts of investments.
"SBG has the ability to find excellent business ventures, but has risks at the same time. SoftBank Corp. should take the opportunity of listing its stock to create new business projects from a viewpoint different from that of SBG," said an analyst.
(Japanese original by Mamoru Ohara and Arimasa Mori, Business News Department)