CEO Message

Transformation into “SoftBank 2.0”

July 2015
Masayoshi Son
Chairman & CEO

Thirty-four years have now passed since the foundation of SoftBank, and so far,our position has been one of SoftBank holding assets in overseas companies as a company in Japan. Now, however, we are going to the second stage of SoftBank—“SoftBank 2.0”—in which we will transform SoftBank into a truly global company that can ensure sustained business growth over the long term. We are now in a major transition period.

As the founder, I have set out to create a business model that can deliver continued business growth for centuries. However, many technology companies face the common challenge of a 30-year life cycle where growth is followed by decline. This decline stems from factors such as the increasing obsolescence of technologies and business models, and an over-reliance on founders.

What is the solution? Not only do we need to transform our existing businesses, we also need to have a comprehensive structure in place for supporting disruptive entrepreneurs and facilitating continued development with them. Together with our new representative director and president & COO, Nikesh Arora, we are going to accelerate this transformation.

Steady business results centered on domestic telecommunications
expanding group of disruptive entrepreneurs

In terms of our consolidated results for fiscal 2014, net sales increased 30.1% year on year to 8,670.2 billion yen, EBITDA was up 19.9% to 2,132.9 billion yen, operating income decreased 8.8% to 982.7 billion yen, and net income attributable to owners of the parent increased 28.5% to 668.4 billion yen. The decline in our operating income mainly reflects temporary gains recorded in the previous fiscal year in association with the consolidation of GungHo and WILLCOM. If we exclude the effects of those temporary gains, we can see that all of our key performance indicators are growing steadily, with operating income growing 19.4% year on year.

Currently, we have two main business domains: one is telecommunications and the other is the Internet.

First, the domestic telecommunications domain. Nine years have passed since the acquisition of Vodafone K.K. (currently SoftBank Corp.). When we first announced the acquisition, many criticized us because they thought mobile phones had already penetrated the market, and some thought it did not make sense for us to acquire a mobile phone business at that point. In Japan's mobile phone market at the time, conventional phones for voice calls were the mainstream. It was just the dawn of the mobile Internet. I was certain at the time that the mobile Internet would become the driving presence in the market. I explained that my intention was to be head of a mobile Internet company, not a mature telecom company. Most people at the time did not understand what I was trying to do.

But now profit from our Mobile Communications segment has grown to nine times that of Vodafone K.K. before we acquired it.

With regard to our network, we have been making aggressive capital expenditures ever since we acquired the license to use the platinum band (900 MHz) in 2012, which is the optimal band to use for mobile communications services. As a result, our network quality has improved significantly. Capital expenditure peaked out in fiscal 2014, and the domestic telecommunications business is now at a stage where it produces a steady free cash flow—that is, a stage where it is fully able to continue stable operations. And since April 2015, Ken Miyauchi, my right arm since shortly after our foundation, has been leading SoftBank Corp., the operating company responsible for the domestic telecommunications business, as president & CEO.

Meanwhile, at Sprint in the U.S., in August 2014 we appointed Marcelo Claure as the new president and CEO to spearhead initiatives to revitalize the business. He is the founder of our subsidiary Brightstar Corp. (Brightstar), which he built into the world's largest specialized wireless distributor. Under Marcelo's outstanding leadership, postpaid net subscriber losses on the Sprint platform have been reversed, and this trend is continuing. The Sprint platform postpaid churn rate improved dramatically in the January to March 2015 period, and with network quality improvements on the way, we expect to see it improve even further.

Next is the Internet domain. I believe this will become even more important to us going forward. In fiscal 2014, Alibaba listed on the New York Stock Exchange, and we were able to validate the results of our investment in the company, which has become the largest e-commerce company in the world. With regard to new investments, the operating companies for Snapdeal, one of India's leading online marketplaces, and Ola and GrabTaxi, two of the leading taxi-booking platforms in India and Southeast Asia, have shown strong growth, especially in key performance indicators such as GMV and booking numbers.

We intend to accelerate these kinds of Internet-related investments and transform into an “Internet-focused SoftBank” and a “global SoftBank.”

However, the reality is that most Internet companies in Japan find it very challenging to develop their businesses overseas. I believe this is because they try to apply business models developed in Japan without adapting them for local markets overseas, where cultures are completely different. Our goal in developing a “global SoftBank” is to realize a unique business model that cannot be imitated by working together with entrepreneurs who have deep insights into their own markets around the world.

New management partners

As we become a group of disruptive entrepreneurs, we have found a great partner, Nikesh Arora. I have known him for seven years now, and I have been working closely with him since he joined us in September 2014. He is 10 years younger than I, but has experience in running a company in his prior position as chief business officer (CBO) at Google Inc.

I am confident that his profound knowledge of the business models and technologies of global Internet companies and his wide network of contacts with the management teams of such companies will empower him to drive our transformation into a truly global company.

As we embark on this journey of change, we have changed our company name. The holding company SoftBank Corp. has changed its name to “SoftBank Group Corp.” to clarify its status as a pure holding company. As representative director and president & COO of SoftBank Group Corp., Nikesh will work closely with me to accelerate our transformation.

Together with our group of disruptive entrepreneurs, we will create a business model to ensure sustained growth and further increase enterprise value.

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    The content of this page is based on information included in the ANNUAL REPORT 2015.