Softbank in Yahoo Japan selloff

In an effort to bankroll its broadband business, Softbank Corp. announced Monday it will offload around 17 percent of its group stake in Yahoo Japan Corp.

Meanwhile, Yahoo Japan, which is currently traded on the Jasdaq over-the-counter market, responded to media reports earlier in the day by stating that it has not yet decided whether to apply for a share listing on the first section of the Tokyo Stock Exchange.

But company officials did not rule out the possibility of this happening in the future.

In all, Softbank and its fully owned subsidiary, Softbank BB Corp., will offload 40,000 Yahoo Japan shares, or some 8.5 percent of Yahoo Japan’s outstanding shares. The sale is scheduled to take place later this month.

In light of the closing price recorded on the Jasdaq market Friday, these shares will generate an estimated 81.6 billion yen.

This marks the latest in a series of asset-selling maneuvers aimed at financing Softbank’s broadband network business.

Having already sold off shares in Yahoo! Inc. of the United States and UTStarcom, it is in negotiations with bidders over its 49 percent stake in Aozora Bank.

Following the move, the group’s equity stake in Yahoo Japan will stand at 42 percent of the firm’s outstanding shares, according to Softbank officials.

Officials of both companies stated the move is designed to increase the liquidity of Yahoo Japan stock.

The business daily Nihon Keizai Shimbun reported, however, that Softbank had decided to sell off its Yahoo Japan shares to allow the latter to meet the conditions necessary to debut on the TSE.

Firms in which the top 10 shareholders own a combined stake of more than 80 percent are forbidden from listing on the TSE.

Currently, the Softbank group and Yahoo! Inc. hold 83.9 percent of outstanding Yahoo Japan shares.

Citing a lack of fluidity on the Jasdaq market, where Yahoo Japan represents some 13.5 percent of the total market value, Yahoo Japan officials said that some of its investors have called for the firm to be listed on the TSE.

Makoto Ueno, an Internet-sector analyst at Daiwa Institute of Research Ltd., said that a move by Yahoo Japan to the TSE had been widely anticipated, with many investors viewing its presence in the Jasdaq market as a case of a big fish in a small pond.

“They have been considering it since three years ago,” he said. “They have not yet been able to do so because of the falls of technology-related stocks in the last two years.”

The firm has waged aggressive campaigns in an effort to attract subscribers to the Yahoo! BB ADSL service, with so-called parasol troopers handing out free modems on the streets and pitching a generous two-month free trial.

The total number of subscribers topped the 2 million mark earlier last month, the fiscal break-even point excluding expenses incurred in attracting new subscribers, according to company officials.

The firm forecast that its business can start generating a monthly profit sometime during the 2003 business year.

But some analysts remain skeptical over the firm’s ability to recoup its massive investment in broadband infrastructure.

“People tend to pay attention to when it can attain the break-even point or turn into profitability. But it should not be the case of Softbank,” said Ueno of Daiwa Institute of Research. “The important thing is how long it will be able to maintain such profit.”

Ueno predicted that Softbank will need to maintain 3 million subscribers for at least five years to earn back the 200 billion yen that has been poured into the business.

It is a tall order for the firm, given the rapid growth of the faster fiber-optic network, he said.

In this regard, he cited a forecast issued by Daiwa Institute of Research that the number of Yahoo! BB subscribers will peak at a little more than 3 million in April 2004.