SoftBank Group Corp.
Q3 2020 Earnings Call Transcript

Published: 12 Feb 2020

[Operator:]

Welcome to SoftBank Group Corp. Earnings Results Announcement for the 9 months period ended December 31, 2019. First of all, we would like to introduce today's participants. From left, we have Mr. Masayoshi Son, Chairman and CEO; Yoshimitsu Goto, Senior Vice President and CFO; Kazuko Kimiwada, Senior Vice President and Head of Accounting Unit. This meeting is live broadcast over the Internet and can be heard by telephone. Now I would like to invite Mr. Son, Chairman and CEO, to present to you the earnings results and business overview of SoftBank Group. Mr. Son, please.

[Masayoshi Son:]

Hello everyone. Good afternoon. My name is Son. Just three months ago which was also the earnings results I mentioned that I learned a lesson. Maybe I said that over 20 times that I learned a lesson. So explaining the last quarter's result in one word I would say the big negative results. After that tough winter spring has come that's something actually we felt by ourselves that's how I feel today this morning. So now let me go into my presentation and also explain about our earnings. This quarter in one word I would say tide is turning. How it turned or how is it turning, I would say three points and let me go one by one. First of all, about six years ago it was a long history and long road but finally we are about to finalize and we are in the final stage of the merger between Sprint and T-Mobile last night. We won “on merger between T-mobile and Sprint”. Actually three regulatory authority approval was necessary which has already been provided. However, in several states has been asking for dismiss of the claim but we were able to win. Therefore, that we’ve made a big progress on this matter and we are stepping into the final stage of the merger and surprise in one day about [70%] surge in Sprint share price as you can see this slide Sprint status has largely turned around. And next EBIT, last quarter I said that the big negative I mentioned in the result that the cause was basically due to the Vision Fund and every quarter several hundreds of billions of Yen and valuation gain was recorded. However, in the last quarter it made a big negative figure. However, that's been making a turnaround quite largely. This is the December end situation but in more detail in Vision Fund there are about eight companies went public in the past two years since our investment started. In the past two years two companies went public which is already a great success from my understanding but with these eight companies seven times, 0.9 times 2.5 times actually multiplied. These are the share price compared to how much we have invested and the total gross investment cost about $9.5 billion will be invested and we made about quite a big gross gain. Of course the last quarter was still a negative figure, however, this morning as of today actually in past one month or so 4.3 billion gross gain increased. Actually the main cause was Uber in the last quarter, it was a negative figure in Uber. However, this morning as of today's number actually that has been turned into a positive. So that the compare to what we have invested the gain was in, we have been able to see the gain but in December, for December end quarter but not only that one month later we have about ¥300 billion gain was already been made. Therefore, December Vision Fund situation was a negative [¥970 billion to ¥200 billion] recovery was made but still the negative position but as of today since December to-date actually it made about ¥300 billion Yen gain has been added. So effectively Vision Fund has turned around to positive. Other SoftBank Group overall consolidated base including Vision Fund ¥2.6 billion EBIT which is return profit in cumulative from first quarter to date still some negative are recorded. However, on the quarterly basis we've been able to recover a return to profit so that ¥300 billion to-date since December to-date about the one month or so but ¥300 billion gain has been recorded, so that effectively we can say that we have turned around to positive. And let me go into more details in consolidated results sales. Net sales as you can see on slide EBIT net income all that you can see in graph. This is a side net sales compared to last year cumulative number was it below net income also positive but still some people were concerned that the SoftBank may go bankrupt. They comment time to time that see however as a matter of fact in the past nine months ¥476 billion net income positive here. Therefore, bankruptcy I don't think that we are in such a situation and here adding to here ¥300 billion one month or so since December only from the listed securities we were able to see the gain. SoftBank Vision Fund is also making a big impact to our consolidated results and we have invested in 88 companies in total. We are about to start Vision Fund to another 10 or companies are what we are looking at for a new investment opportunities we are preparing for a pipeline if you will. It goes through the investment results 38 3 recorded positive ¥1.9 trillion and negative ¥-0.8 trillion. So all in all we recorded ¥1 trillion of gain. People often say that Vision Fund is fading but as a matter of fact as of end of December recorded ¥1.0 trillion of gain. On top of that [¥300] billion Yen has been recorded since then. So total we invested in ¥8.8 trillion and we yielded ¥1.3 trillion Yen of gain. ¥8.8 trillion Yen investment and ¥1.3 trillion Yen of gain. So I think we are not bad. It's being only two years since we lost a fund and looking back in the future we would say that we started off a great start. I believe that in the future when we look back this achievement we will say that we took off to good start. Some made a huge loss including Uber but most of them yielded a lot of gains, two times, three times and even more against the investments we’ve made they yielded a lot of gain but I think most people say that wait you will still have to address saying WeWork issue. So let me talk about WeWork. In the last 100 days what we have seen WeWork in a co-working market which is growing rapidly WeWork is running the business in a huge scale. In the past there were some issues in their management but with under the new management they have developed a new five-year growth plan. Also they were able to fund new business plan and also they appointed a new leadership. As you can see the market is a huge. ¥180 trillion and in terms of co-working space our market is growing 15 times and WeWork has offices in 140 cities and they have WeWork offices in 37 countries and they are going to open buildings up to 1,000. In the five-year plan they have set specific milestones and targets. Sometime within this year they are aiming to achieve $1 billion of revenue per quarter. Next year they want to turn EBITDA to positive. The year after they want to turn it free cash flow positive and in 2023 they want to achieve a million memberships and in the last year of the five-year plan they want to have $1 billion of free cash flow. So they have specific targets in their five-year plan. So how much is needed to make that happen? Well, at this moment they have about a $1.2 billion of cash and cash equivalent as of December 31. And we had released restricted cash and secured facility as well as unsecured notes. Their available liquidity as $5.3 billion. So that's a funding situation. So in the five-year plan I’ve made when they want to turn business into positive. Well, to breakeven they would need a $2.5 billion of free cash flow which is this orange part on the graph. So after the cash needed to make it to break even they should be able to have $2.8 billion of available liquidity post break-even. Usually companies like this will face a trouble in terms of cash management but that they have plenty of fund or liquidity, $5.3 billion that is. So with a new leadership team SoftBank will work together with them to help them achieve a business plan and WeWork going forward, I believe that they are going to turn around the business and as you can see on the slide this picture is a man called Sandeep Mathrani, he is newly appointed Chief Executive Officer. He led a turnaround of GGP out of bankruptcy and he made actually he helped making the enterprise value of this company to $42 billion. So Mathrani is a new CEO of WeWork and with this plenty of the liquidity and with a WeWork position in the market he believes that he will be able to turn our WeWork around. So looking at domestic business now which is going well steadily. SoftBank domestic business detailed numbers were already disclosed because it's a listed company. So revenue is going up, operating income likewise going up, net income up and that they have built subscribers of smartphone and SoftBank keeps increased both in revenue and profit in thus Japanese domestic market, telecom market and Yahoo Japan since SoftBank consolidated the holding. They improved operating income and also the user number of PayPay is growing well. And market share wise PayPay is gaining ground and I believe that PayPay is by far the number one in Japanese payment market. In the group Alibaba contributed most enterprise value, in Alibaba as you can see in China is absolutely number one e-commerce market and that they are still growing in revenue 41%. Also net income wise they are growing at 46% and it's not ups and down rather steadily they are growing big. Free cash flow, steady growth is a same in six-month accumulative number about ¥0.9 trillion or in one year about ¥2 trillion of free cash flow is made by Alibaba. So they are making a plenty of free cash flow. So Alibaba share price is not in the bubble. In fact, Alibaba share price is justified by plenty of free cash flow that's where Alibaba is at the moment. Alibaba in the past few years actually they have made more than twice actually three times increase in market cap and also as I mentioned earlier in the beginning of my presentation Sprint and T-Mobile we've been having a very difficult time in the past. However, amount that we have invested about ¥2 trillion and current share price based on our ownership. Third point, some trillion Yen. So considering that actually that the compared to what we have invested we have made a certain gain from here in this investment. T-Mobile and Sprint won in court. So actually God made a quite a good opportunity to tell us this news in the last night just before the day of the earnings results announcement we’ve receive this great news. So we are in very happy situation. Of course, this merger has to be beneficial for the citizens of United States. So that we will pursue and we believe that we will be able to build 5G network and services with our technology and spectrum. In addition to that, its merger with T-mobile we believe we'll be able to take a good portion of each so that we will be able to solve the digital divide situation and at the same time can provide the better service in lower prices for all Americans alternative to in home broadband and they will be able to compete with those deep carriers with the 5G network also creating the job nationwide. So these five points or benefits that we'll be able to make from this merger that's something that we are expecting and the court actually believed that these benefits or that our claim is true. So that's why we'd be that we were able to [work] the situation. I've been mentioning about the EBIT, sales net income and so on but when you look at shareholders value we SoftBank Group since we became the group structure holding company we are the investment vehicle, investment company that's how we been transforming our business and each businesses, is each operating business we will have our operating companies which focus on the operations. So domestic telecom for SoftBank Corp or Sprint, Alibaba, so they have their own operating business but the SoftBank Group Corp., is the strategic holding company for those. So that SoftBank Group Corp. majority of the assets that we have is the marketable securities or equity. So the body of such equity how much do we own that's the question and ¥26 trillion we have that's as of September situation which is about six months ago. So as of September ¥26 trillion of the value of asset and at that moment net interest-bearing debt was ¥5.5 trillion. The Sprint debt actually is consolidated from the accounting point of view. As a matter of fact this is non-recourse to SoftBank Group therefore we don't have any obligation to repay. This is a Sprint's debt and Sprint has to repay and that's something that I've been explaining but still because we consolidate their debt and there are arguments that we should consolidate and count those debts but this great news that we heard last night which is we are winning in court on merger between Sprint and T-Mobile. It is now clear that we'll be able to say that we'll be able to end these arguments to include Sprint's debt into our accounting. So that the net interest-bearing debt what we have purely we have which is ¥5.5 trillion in SoftBank Group. So if we just take that out that will give you a shareholder value. So September end of last year equity value of holdings less debt is the shareholder value. So in English we call the shareholder value and that's generally is used but in Japan or the traditional business operations shareholder value, the word of shareholder value is not commonly used because we don't have much of the history of M&A in Japan. And that's because we don't have long history of M&A in Japanese market but in Europe and the U.S. shareholder value is something that are often used and the shareholder value here which is about ¥20 trillion. So just remember this number shareholder value, asset less debt and what borrowings gives you ¥20 trillion and as of today what happened asset to ¥1 trillion from their net interest bearing debt ¥6 trillion we take that out then that gives you ¥25 trillion. So out of the end of September till to date in the past four months about ¥20 trillion of shareholder value increased to ¥25 trillion. So we just taking the borrowings out, so that's something close to net asset which increased from ¥20 trillion to ¥25 trillion so that means ¥5 trillion increased from the end of September last year. So asset value or the equity value we have, how much did ratio we should be maintaining which I have been saying we should managing less than 25% in normal case. That's our internal discipline that we've been keeping and actually we are 16% loan to value which is very healthy in the sound status. So only 16% of loan out of borrowed total value of assets, so which is very healthy situations out of 100 up to 25 that's the loan or borrowings that we should be managing. That's our internal disciplines that we’ve been managing and actually this is within this scope. As I mentioned less than 25% even in abnormal period if there is any other Lehman Brothers incident tomorrow in such situation we still sit up at threshold of 35% in such cases and also we would like to maintain cash position covering bond redemption for at least next two years. And in addition, secure sustainable distribution and dividend income from SoftBank Vision Fund and other subsidiaries. So those three our financial policy and we've been operating our business. And also as you saw in WeWork a situation we learned the lesson a lot and I mentioned we will make no any providing risky package. So that's another clear policy not to put it into our internal disciplines. So there are many policies that we’ve been making but here I want to show you one picture here. So for you can you see it? What do you see? From your left-hand side it looks like duck, from right-hand side it looks like rabbit. So for you, you may see both sides. So if I tell you may say that's true you can look like a duck from left, look like rabbit from the right. So from your left it looks like duck from your right in the same picture same slide but if you look at from right it looks like rabbit and now why I presenting at this slide? Looking from left EBIT, looking from right shareholder value. So the same SoftBank if you look at SoftBank from left from accounting perspective EBIT often people say that a company's performance has to be presented in EBIT. Which is more important EBIT or shareholder value? If you want to see performance of a company in the last 3-4 months should we look at the company from left or right? My conclusion is you should look at the company from right. You should look at SoftBank, if you want to know how SoftBank is performing not from the left, you have to look at SoftBank from the right. That's my message here. So let me dig deeper. From the left EBIT. So every quarter Vision Fund has started yielding [¥300] billion of gain, and in the last quarter ¥-225 billion of EBIT in [indiscernible] SoftBank Vision Fund. This was as of December end. As of now since then we have seen ¥300 billion up. So this is the quarter financial announcement. So you may say that you should show the number only -2 to 5 but I'm saying that since then we have grown EBIT in SoftBank Vision Fund by ¥ 300 billion. And EBIT from SoftBank Group consumer perspective now as of December end ¥ 2.6 billion. But as of now actually we see positive ¥ 300 billion Yen whether it's a ¥ 2.6 billion or ¥ 300 billion it just the marginal error why because you should not look at EBIT from accounting perspective but you should look at shareholder value; how much gain or loss the company recorded because we are investment company. So sales, for example doesn't matter a lot from investment company perspective. I'm sure some of you have invested in some securities or stocks if you have shares whether EBIT is important or revenue is important, let's say you invested ¥ 1 million and the debt was ¥250,000 then net ¥750,000 excuse me if you borrow ¥ 250,000 to invest in ¥1 million so net a ¥ 750,000 has it grown or decreased; that's important for you. In the last 4 months since end of September to February for the last of 4 months it grew by ¥ 5 trillion. So if your asset grew by ¥ 5 trillion in last 4 months, you must be very pleased. So usually you don't see a growth in the units of trillion Yen but anyway we are sought increased by ¥5 trillion in the last 4 months and after the debts the net asset as an investor we saw growth from a ¥20 trillion to ¥25 trillion. Why? Because value grew by ¥5 trillion. As a performance against investment after debt we have seen increase of asset by 5 trillion Yen. That's our performance record in the last 4 months that's the most important performance measurement you should look at. Like I said from left you see a face of duck, from the right you see a face of rabbit. From my prospective SoftBank is not again operating company anymore. SoftBank is an investment company, for SoftBank Group as an investment company EBIT or revenue are irrelevant anymore. In fact, you can forget about those numbers because of those unnecessary numbers if you will SoftBank’s value may look very complicating whether ¥2.6 billion or ¥5 trillion or ¥300 billion or not they don't matter a lot. Why so different in the argument? Any of you, Uber share prices ups and downs. Whether that has a direct impact on EBIT? Alibaba shares ups and downs whether it has a direct impact on SoftBank's EBIT? Any of you can understand, 100% sure how many of you I'm sure that you are experts, how many of you know how much impact those ups and downs of Alibaba's shares and Uber share impact on EBIT SoftBank. Don't be shy let me ask you again Uber share price from to SoftBank’s whether Uber share price goes up, whether you should count it as an EBIT as 100% and Alibaba share price went up let's say and should we count Alibaba share price as 100% EBIT to SoftBank? 50%, 100% how much percent or not at all? How can you be sure? I mean anyone can be sure to answer my question? That's a huge issue if you don't understand because you are an expert. In fact, it's not your fault, my fault we were not able to explain clearly enough for you but after my explanation starting tomorrow you should be able to see things differently. So anybody raised hand. Can you answer my question, how much of the share price up of Uber or share price Uber 100%, Alibaba 0% yes. You are correct. You're correct. But I find it a huge problem. There are about 100 people in this venue and you are all experts but only one person answered a question with confidence and he was right and nobody raised a hand because you are not sure. So if there is any increase or decrease in Uber share price that will be 100% recollected to our EBIT. Our ownership in Alibaba if there is any ups and downs, even the penny will be reflected to our EBIT. From the accounting’s point of view that's the case which is a correct accounting process. What is different Uber, WeWork, Slack, [indiscernible] these companies those were invested through SoftBank Vision Fund. SoftBank Vision Fund as an operating company investment as a core business, its Vision Fund investments. So we as an GP of SoftBank Vision Fund we count these as EBIT. However, when it comes Alibaba ownership, it’s not invested through SoftBank Vision Fund but it is invested from SoftBank Group directly or through our holding companies. Effectively we have direct investment in Alibaba. It's not the fund accounting here. Therefore, Alibaba share price even they increase but that will not counted in our EBIT. Once again, EBIT ¥2.6 billion that's not included in Alibaba share increase. Actually 5 trillion Yen increase in our shareholders value majority of it coming from Alibaba. About [¥4] trillion in contribution to our shareholder value which is not counted even the penny in our EBIT. So in the past three months my friend told me Masa you are okay. I am your friend. I am your side. So they were trying to comfort me and many people came to me to say a word. Those who did not say anything thinks that that's great. Maybe SoftBank is going to go bankrupt. So that that's how I thought. So those skeptical people are there also, but actually in my mind or thank you for comforting me but reality is that we have ¥5 trillion actually even richer. ¥5 trillion more asset, if Alibaba is counted in our EBIT or if we for example Sprint share price surge by 70% or so yesterday if that is counted in our EBIT that's going to make us even richer and but that doesn't mean that I want to pursue EBIT numbers. So that's fine but it’s only the accounting measure, Uber share price does reflected to our EBIT 100%. But on the other hand Alibaba share price increase does not counted to EBIT even the penny. As a result if you look at SoftBank Group in EBIT that maybe misleading should you measure us in shareholder value. And I think as I show you that duck or rabbit picture, SoftBank future performance or the measure to see our performance is only looking at from right. Why don't you look at only shareholder value whether this increase or not. That's the biggest and only indicator whether that our investment has increased or decreased compared to what we have invested in then from that sense in the past four months 5 trillion Yen increased, 20 trillion Yen has increased to 25 trillion Yen. So as an investment company this is a great performance I believe and I am so proud of it. Our share price only one day today increased even more and now reaching to ¥12 trillion market cap. So only one day today 11% increased. So it’s accounted therefore about 12 trillion Yen. The peak time was 20 trillion Yen or even more back in year 2000. But our shareholder value as I mentioned earlier SoftBank Group one and only indicated that, performance indicated that you should be looking at is our shareholder value and that has been without any fail increasing in the past 20 years constantly. Almost past twenty years constantly increasing our shareholder value exponentially. So as shareholder effective asset, SoftBank Group's asset, it's not that plant, it's not real estate, it's almost majority of them marketable securities and the marketable securities value less borrowing is 25 trillion Yen. So per share basis currently 5751 Yen closing price today of our share price. So I would say 5700 Yen per share basis your value. Marketable securities debt gives you 12,000 Yen. So about 52% discounted, 52% discount that's why activist recently has shown the interest over our share and actually make some coverage in newspapers and so on but actually our company share has not been properly valued yet good or bad but the shareholder value has been constantly increasing but the market view it’s just skeptical on us. The SoftBank may go bankrupt. Those kind of angles still there exists but as I mentioned in the beginning of presentation which is the summary of today's presentation that tide is turning. So today's earnings result announcement shows our tide been turning. What's been changing? Three points. Return profit and showing the great sign of it. Shareholder value increased by 5 trillion Yen and Sprint which was the biggest concern we had has now shown the great sign and we are in this final stage to complete merger. So these three points, the one that I would say our SoftBank Groups tide has turned. We will continuously pursue maximizing shareholder value. Foundation of the company, corporate philosophy it's not only for our economical activities. Still we've keen to pursue information revolution happiness for everyone. That’s still our corporate philosophy and that's the only reason for us to run this business but as a listed company and we've been using the very precious money from investors so that we do have a responsibilities to maximize shareholders value as a public company. That's another mission for us. That's all for my presentation. Thank you very much for your attention.

[Operator:]

Now we would like to open the floor for questions. If you have any questions please raise your hand and wait for the microphone. Please state your name, begin your question by stating your name and affiliation. We would like to take up to two questions per person so that we can take questions from as many people as possible. If you have any questions please?

[Naotaka Owada:]

Owada from Nikkei Computer. Talking about 52% discount and also you mentioned activist investor actually acquired SoftBank’s shares for SoftBank Group what kind of benefits or challenges these are could oppose to Softbank, if you could elaborate on that your view? I wonder if they may ask you for changing the leadership or whether they have a big say or not all shareholders are important for us as partners. Hopefully we’d like all shareholders to give us open feedback

[Masayoshi Son:]

We are welcoming any feedback of forum shareholders for us to run the business better. So any feedback that helps us to run the business better we are open and as a shareholder of course all shareholders want their investment to grow. So whether silent shareholders or noisy shareholders in fact I am the biggest shareholder of SoftBank, so I think we are all on the same boat including myself as shareholders of SoftBank. Sometimes there are disagreement but any opinion is welcome from shareholders and prominent shareholders are with us and that's something that we are grateful for. And second question is about SoftBank Vision Fund 2 and what could you give us a status of funding. Well, SoftBank Vision Fund 2, so WeWork challenges and Uber’s challenges for example share prices went down since IPO of Uber for example though due to those unexpected events we have cost concerns amongst our potential investors of SoftBank Vision Fund 2 and again we have received a lot of feedback from people and we are actively engaging in discussion and sooner rather than later once a discussion is progressed full on -- one should start. As of today we have not stopped investment at all with SoftBank Group's fund. So we keep investing in our businesses like I said earlier we have several trillions of Yen of cash and cash equivalents and bless debts. We have assets worth 25 trillion Yen. So SoftBank Group has a plenty of liquidity in various ways. So as SoftBank Group we can keep investing in businesses and the ones potential partners are more comfortable they will join us for a new investment. I think there are a lot of options available.

[Operator:]

Next question please?

[Unidentified Analyst:]

My name is [indiscernible] Newspaper. I have two questions. First of all is about Elliott back in 2004 they are being holding SoftBank share and the first time they met you when was at the first meeting with you? And my second question Elliott, I believe that making three requests have you made any response back to them, buyback 20 billion increasing independent directors SoftBank Vision Fund transparency and disclosure those three can you respond?

[Masayoshi Son:]

Management of Elliott and myself direct meeting was about two weeks ago if I recall correctly. We made an open discussion and had a good discussion with them. Buyback SoftBank has been doing several buybacks with large scale in the past few years. Whenever we have flexibility of capital, we have intention in principle to do a buyback which is also matches to my intention as well but how big and when is something different discussion because we have the bond issue as well and the bond rating has also needs to be considered as a balance. So that angle is also necessary to be considered so that the bond balance and the flexibility in partition both needs to be taking a good balance so that we can decide on the size and the timing. Time to time that in principle we would like to have a buyback which has a same direction that they have and I have. Independent director recently [indiscernible] who has been almost 18 years at the who been who has been serving as our director of SoftBank Group Corp. which I very much grateful about but he now would like to focus on his own business and he has decided to step down from our board and we do need to consider shuffling directors and also like to increase our independent directors as well. So regardless Elliott say anything or not we ourselves actually been thinking to now looking into the candidates for the nominee for our independent directors which took a place about two months ago and now starting the discussion. So for general holders shareholders meeting in June that we would like to nominate the NASCO approval which is also the same direction as Elliott has. Vision Fund governance or the transparency as a third one you mentioned, of course from our LPs or Vision Funds that we should make sure that we shouldn't make another failure like we did in WeWork and for governance we've been tighten up and have a good management of governance on the Vision Fund and also as for transparency we would like to deeper our transparency as well. In principle in UK this is the regulated company, regulated fund under UK law therefore we of course follow all the rules and regulations for the fund operation but also we would like to add more efforts in enhanced governance and transparency. So in principle activist, investors or not activist investor like passive investors may have a similar type of concerns but we would like to address sincerely.

[Unidentified Analyst:]

[indiscernible] freelancer. You reported about Yanai-san, I'm sure that [indiscernible] and Yanai-san are personal friends but all of a sudden Yanai-san made announcement of leaving the board and Mr. Son also you mentioned that Yanai-san was a great control and after Yanai-san gone some people may concern that Mr. Son may go out of control. So after Yanai-san’s retirement corporate governance is kept or not? That's one question. And second how do you think did Yanai-san made the decision and after the retirement what will happen in your relationship?

[Masayoshi Son:]

Well, Yanai-san had been on our board for over 10 years and almost every board meeting he made a very stronger comment and we took it as healthy pressure and we try to address his feedback and I respect him a lot and we really appreciate Yanai-san’s contribution to us for the last 10-20, almost 20 years. Again Yanai-san wants to focus on his own business he said and when I am running the business of SoftBank I understand because I'll be too busy to serve as independent board of director at a different company. As a friend, however, going forward I believe that our relationship remains very important and whether he is a board member or not I'm sure that he will stay as a good adviser to us and also we keep playing golf each other and hopefully he will give us continuously constructive feedback. Also we can't rely too much on Yanai-san anymore, so like I said earlier we want to enhance the governance going for as well as consider increasing the number of independent directors.

[Operator:]

Next question please.

[Unidentified Analyst:]

My name is [indiscernible], journalist. So you showed us the rabbit and duck picture in the EBIT. We can forget about it. If that's the case Masayoshi Son yourself is not a businessman but you are the investor. Can I regard you in that way? And I believe this announcement many people are watching right now but if you say you can forget about EBIT then those people who are working very hard in 5G development or they who are working very hard for the collaboration with Yahoo Online they may be sad to hear that?

[Masayoshi Son:]

That's completely misunderstood. The role is different what I'm saying is role is different. Operating company people I'm not saying that I myself as a CEO of operating company I've been serving operating company for over 30 years and I've been directly managing operating business and we do a lot of businesses and our sales, EBIT always looking at those numbers every day and every day we've been operating based on those numbers. So I don't deny those efforts at all. But it's not that operating companies right and investment companies wrong or we are pursuing then that how do you call Mr. Buffett then. Mr. Buffett is also a great business person and also he has been many CEO of operating company is a great businessman. Only the difference is a role which is better which is right is not the question. So SoftBank Corp. to serve domestic telecom service and pursue sells EBIT daily basis of course that's something that they should be focusing on same as Yahoo Japan, Alibaba, Uber. However, as a strategic investment company we hold their securities and also direct or indirectly influencing managements but as a cluster of number one strategy 100, 200, 300 companies as a cluster we would like to proceed with the information revolution. In a previous earnings results announcement I'm not becoming the player myself but I would like to be a conductor of the orchestra. That you may recall either it was AGM or earnings result announcement I don't remember specifically but in the kids age I didn't understand the importance of conductor who doesn't play any instrument at all but now I know and I understand it is very important and essential role that the conductor is serving which I now realized. So those players who play instrument is also important and I admire them but at the same time I would like to serve the different role. That is something equally important as players in SoftBank Group. It's not pursuing cluster number one strategy and we other one leading information revolution. So we have stepped up the stage now and in the new stage we would like to serve the new role as an investment company we transformed that we should be looking at such measures. So that's how I want you to understand. So you have changed from Bill Gates to Mr. Warren Buffett. Mr. Buffett in myself is a little bit different again in a way but roughly speaking that's you can call it that way too and that does not mean that which is better which is right.

[Unidentified Analyst:]

So if I write something to explain about you should I say you as an investor or should I call you as a businessman, business person?

[Masayoshi Son:]

In one world probably investor is the right word but reality is not really true. I'm the information revolutioner. I'm the one that leading information revolution. That's my main mission. I want to do the information revolution, SoftBank Group Corp. with the clusters we would like to create information revolution. So to express I think that I am the information revolution leader but the people may not understand. So in a general word wise interpreted into Invista probably that may be more easier for market to understand. In the past about 20 years ago when I visited Taiwan, a newspaper in Taiwan called me Masa Son is coming to Taiwan from Japan and a big headline adventurous investor. The character, Chinese character I read which is probably interpreted in to venture capitalist but probably that's quite true in a sense. Mr. Buffett is not adventurous investor. He's a smart one. He's a smart investor but I'm still making some craziness are still there for me. So adventurous investor I would say.

[Unidentified Analyst:]

[indiscernible] from Bloomberg News. You said that you're in line with Elliott Management in terms of a share buyback and I believe that Elliott expects you to sell Alibaba shares to buy back SPG's shares. So what's your position in terms of Alibaba's exit? Well, you should sell out Alibaba share on not?

[Masayoshi Son:]

Well, every year people will say that you should sell Alibaba shares even SoftBank's Management told me that we should sell Alibaba’s shares even before IPO but I kept saying that we don't want to sell Alibaba only minimum we would sell but not anymore and looking back the share price of Alibaba is triple times bigger than the price at which some people encouraged me to sell Alibaba share. So it proves I have been right but I'm not saying that we are not going to sell Alibaba share anymore forever, but when, how many shares and how there are a lot of views and we need to look at different views in a good balance. Alibaba's revenue has been growing a 40% annually. Net income free cash flow annually they are still growing close to 40% like I said earlier in my presentation. For the next foreseeable future I believe that Alibaba keeps that momentum. So I don't have intention to sell Alibaba's shares in hurry. I'm not saying that we are not going to sell at all but we don't have to be rushed to sell Alibaba's share. That's my position.

[Unidentified Analyst:]

And Vision Fund. So if you not sell Alibaba shares, do you have to sell you have to choose either SVF or buyback whether dividend or share buyback?

[Masayoshi Son:]

Again you need to look at different angles and a good balance timing and scales and methodology you have to look at those in a balanced way. I am again the biggest shareholder of SoftBank Group. Naturally, I am interested in share price of SoftBank Group and I hope that SoftBank Group's shareholder value grow but methodology I'd like anybody to leave it up to us with regards to how we run the business.

[Operator:]

I would like to take our next question please.

[Unidentified Analyst:]

My name is [indiscernible] from NHK. So today's announcement you mentioned earlier that the tide is turning and my first question is that in the previous announcement you said that the you’ve learnt the lesson but you don't shy away but the tide has turned means that you don't regulate anymore. You just become more aggressive is that what you mean?

[Masayoshi Son:]

Daily I learn the lesson a lot, every day basis I learned a lesson but as I mentioned in a previous meeting I don't shy away. I don't shy away from my vision, my strategy, no change on that at all. That's the thing that I mentioned in the previous quarter announcement and same here. My vision, my strategy never change at all but also we have strings in company. Do we have a flexibility or sometimes we got damaged so that we may not have a flexibility but today for this time quarter announcement because of Sprint, T-mobile merger on the final stage and our investment portfolio start showing a good gains. So those are good news and it's interpreted into tide is turning so that's why that I believe will be able to be a proactive management of the business.

[Unidentified Analyst:]

My second question. As an investment company that we need to regard you but at the same time even you forget about EBIT but Vision Fund, EBIT it's something still or negative in cumulative way and how do you think about it?

[Masayoshi Son:]

In my previous presentation slide showed that about 9 trillion Yen investment has been made and as of today 1.3 trillion Yen gain has been recorded in Vision Fund. So Vision Fund is not the failure in the past, only two years has passed since its launch in making such a great performance. I believe that's very successful from the funds point of view or as an fund business point of view. So I said I’ve learnt lesson in a previous quarter but I don't shy away. That's what I mean. Vision Fund performance compared to many funds around the world actually they are really one of the great performer of the fund and I believe they will be making even better performance going forth from my understanding other than Vision Funds actually share of Alibaba is also one of our investment activity as well.

[Unidentified Analyst:]

So you may say investment in Alibaba, investment in Uber what's different and how you may question that?

[Masayoshi Son:]

From me, no any difference in between those two. It's just that Uber, Vision Fund investments that's we are using partners' money creating the expert team for investment and they are conducting the investment activities. Before we didn't have such vehicle but from my mindset investing in Yahoo Inc. setting up the joint venture of Yahoo Japan, investing in Alibaba actually all is the same in the past 20 years. What I've been doing is the same thing. So other that you see SoftBank has been operating company in the past and now transformed into surplus investment company or you see SoftBank actually it has been an investment company from the beginning when we start since the dawn of the Internet. So some of the people may see us as an investment company from the time of the dawn of Internet and both are right and both are correct I believe. We do have operating business aspect also had an investment companies aspect as well but in the past two years as we’ve launched SoftBank Vision Fund operating business aspect has been given to each operating company's CEO and delegated to their own leadership and me myself and SoftBank group management are now focusing on investment aspects. That's how we’ve been transforming and as I mentioned earlier that's not something right or wrong but as reality we've been doing both aspect and now that we are putting the gear more on the investments and that's the stage that we are entering into right now.

[Unidentified Analyst:]

[indiscernible]. Two questions in the three months from October to December what happened at Vision Fund? Still 200 billion Yen in red, Uber is black but why SoftBank Vision Fund still 200 billion. So what happened? What created negative numbers in the three months since October beginning?

[Masayoshi Son:]

So WeWork challenges and Uber. Share price went down and we faced issues in Uber, excuse me WeWork, in the three months from October to December, yes indeed recorded 200 billion of negative numbers but after that so increase of 300 billion Yen again in Vision Fund turned from minus 300 billion to plus 100 billion. So cut over date if you will makes a difference in terms of performance view that the SoftBank Vision Fund has just started and every quarter ups and downs. So we don't have to be upset or happy about a short-term gain or loss because it just started still SoftBank Vision Fund invested a trillion and gained 1.3 trillion that's the reality.

[Unidentified Analyst:]

So my question actually is Uber and is not listed securities the companies like Uber but I'm wondering if there are companies not listed who recorded loss?

[Masayoshi Son:]

Like I said earlier including unlisted companies, 30 companies recorded a gain, 30 companies recorded loss and all in all we saw value increase. Can I show you slide again. Again almost 30 companies in portfolio recorded gain and 30 or so companies recorded loss including not listed companies and all in all we recorded 1 trillion in black and 300 billion in black and so cumulatively we saw increase by 1.3 trillion [indiscernible].

[Unidentified Analyst:]

So Unicom company’s IPO what’s your view, so how many are you expecting Unicom companies to be listed?

[Masayoshi Son:]

I don't know, because every year how many companies will go public or not depends on how those companies perform in the last two years, the fact was 8 companies went public and going forward several companies will go public going forward.

[Unidentified Analyst:]

So your view stays the same.

[Masayoshi Son:]

Yes, absolutely the same.

[Operator:]

Next question please. Due to the time limitation we would, due to time constraint we would like to end this session after taking two more questions.

[Unidentified Analyst:]

[indiscernible] Tokyo. I would like to ask you about Oyo. So business model Oyo, how do you value them and also several hotels are talking about the minimum guarantee and issues occurring and do you see that that's a failure in Japanese market for Oyo business? What is your or have you, do you think that that's failure?

[Masayoshi Son:]

Oyo is a great company and performance it's steadily growing. Hotel owners is increasing every month’s basis and worldwide number of rooms, number of hotels and number of members, number of people staying at hotel is increasing rapidly. 20-some thousand hotels are already under Oyo Group or Oyo franchised hotels in which, out of those 20-some thousand hotels sometimes we have some conflict with some hotel owners that happens whenever you have such franchise business. Always the franchisee and franchisor may have some conflict time to time, different opinions. You may need to coordinate and make a progress and Oyo is still the younger company so that sometimes see some conflict or in the process of their growth they may need to change the menu and so on that of course occurs but continuously as of today a number of hotels, number of memberships, number of people stayed are increasing constantly. That's the reality and performance is making a good growth. That's how I see them.

[Unidentified Analyst:]

Minimum guarantee, paid unpaid is that the issue for you?

[Masayoshi Son:]

Some hotel owners had some different opinions with Oyo site that's what I heard but that's also been having a full discussion with those owners and we are about to solve all those issues I believe.

[Debra Katz:]

Debra, Wall Street Journal. About Vision Fund. Vision Fund 1, 2, 3, it's like investment machine being built, it looks and organization is growing. You are hiring a lot of managers. SoftBank Vision Fund 2, if SoftBank Group end up fully funding SoftBank Vision Fund I wonder if that can continuous investment machines, continue to work or if you need external investor by when you need to have an external investor for new Vision Fund?

[Masayoshi Son:]

Like I mentioned in the presentation, less debt as a shareholder value, we have 25 trillion Yen worth of assets after debt or $23 billion. So we can make investment by ourselves. But we have partners who want to work with us so we would like to be flexible to both approach. Sorry I spoke in English so let me repeat in Japanese. Again we have net asset effectively worth 25 trillion Yen and now that Sprint is going to get almost hopefully, so we have a plenty of options as well as liquidity. So for us to make an investment we have an option to make an investment with our own liquidity and also dividends from portfolio companies or exit of those companies may take place. In fact we have already divested some portfolio companies like in the video or [Flipkart] and we can make investment on our own or we can work with partners, new or existing. We know that there are some concerns among some investors and some criticism even from some partners but we also hear from a potential investors and existing investors that they want to work with us. So for terms and conditions we are still in discussion with potential partners and existing partners. So again we have flexibility and we have options. In the meantime we continue making investment. Our policy or our position remains the same. Another question from you. Yes.

[Debra Katz:]

Related to somebody else question well actually my previous question Vision Fund 2 scale $108 billion was the number in MoU you mentioned before with SoftBank alone or together with partners? How big SoftBank Vision Fund 2 you'd like to envision?

[Masayoshi Son:]

Again we have learned lessons and this time at the moment I think that next fund size it should be a little bit smaller because again we have calls, the concerns and anxiety to lot of people. So maybe we should make a size smaller and we collect funds as a bridge for next one, two years and we achieve some results in the based upon the performance. We will officially launch SoftBank Vision Fund 2. So before the official launch of SoftBank Vision Fund 2, maybe we start from smaller scale and start from shorter period in terms of investment as sort of bridge to make sure that people or stakeholders feel comfortable. So I'm beginning to think about that kind of two steps approach. We have not made any official decision yet but that's one of the options that we started considering. Again we have not draw conclusion yet but that can stepwise approach is something that we begin to think about.

[Unidentified Analyst:]

So that a bridge fund a size?

[Masayoshi Son:]

Again size-wise we are still in discussion.

[Operator:]

Next question please.

[Unidentified Analyst:]

My name is Sam from Reuter. You mentioned the Vision Fund 2, last year July you have disclosed the many organization names but my understanding is that the third party money has not been included but are you really serious about taking third party money? As far as I hear what you just said, Vision Fund 2 has not been launched and will not be able to start in the meantime. That's my first question. And my second question is about Vision Fund 2 industry valuation 30-some companies has increased their value and 30-some companies has decrease in value but that's I believe in line with Elliott's requests. More specifically can you identify the number of, name of company because you don't disclose those at all so that transparency of such fund, I believe requires disclosure of such companies? Do you also feel that way?

[Masayoshi Son:]

Vision Fund 1 amount of investment about 80% of the fund has already been invested. Therefore, the remaining committed capital needs to be saved for follow on investments and so on. Some of them needs to be also saved for the payments of coupon for preferred. So investment from Vision Fund has completed as effectively in the past few months SoftBank using our own money Softbank Group's money we’ve made several investments because we do have a very good pipeline. So that we have made some investments. It's a hundreds of billions Yen level that compares to the normal funds that I believe it's relatively a large amount but that has been made using our own capital. We'll be having a several discussions but the several partners are happy to consider making a big investments in Vision Fund 2. It shouldn't be postponed too long so that why don't we also consider setting the bridge in a year or so, so that we can continuously invest as a partner. That discussion is also going on and that may be something that some good option so that's still under discussion with those concerned parties. So that discussion sometime soon will be closing. So we have received MoU reaching to 108 billion. Then we would like to set aside. We don't need to pursue that size, that large size at this moment but rather look for a little bit smaller size based on those consideration about WeWork and so on but we would like to start and showing some performance with those smaller size of the investments and then that we can find an opportunity or challenge. Regarding your question on the disclosure of the industry because this is as unregulated investments fund, normally those private investment firm, the size of the investment or its investor should not be disclosed. That's the traditions for venture capital and others. Those public securities because it shows the market cap every day it's valued on daily basis and also the amount in the performance within the scope of what we can disclose we've been disclosing but many of those are private companies without their consent we will not be able to disclose their performance. That violates the confidentiality with them. We had a regulated body from the regulator. We cannot cherry-picked and show only the good news and does not show the bad news. The cherry-picking type of the disclosure should not be made. That's another regulation that we've been following. So within the scope of the regulations how far can we disclose continuously or how far should not we disclose that's something that our management and also our investors should have a good discussion to decide and at the same time five or six companies objective evaluator or auditor, five or six companies like are there and every month asking them to test the fair value of those investees and we obtain those opinions and also for our LPs limited partners we continuously share such data with them.

[Operator:]

Last one question.

[Takahiko Hyuga:]

Hyuga from Bloomberg. Question about how companies should be there other investment companies around the world. Some are listed, others are not and disadvantage of listed investment company if you consider that, for example disclosure requirement as an option, would you consider delist?

[Masayoshi Son:]

I think option wise that can be one option. Actually privatizing SoftBank and make it my own company, I seriously thought about that actually. In the meantime instead of being private company there are shareholders who want to participate in our businesses as shareholders. So I'm sure that as a way of funding and financing and to make sure that business is run in healthy way there are benefits to stay listed and of course disclosure some cumbersome if you will as a listed company. So there are benefits other there are some disadvantages. Well, maybe cumbersome is not the right word but we want to maintain transparency and we want to run the business appropriately so that we can bring benefits to shareholders and creditors by us staying transparent.

[Takahiko Hyuga:]

Second question about corona virus and there are a lot of people in trouble and as a SoftBank Group what have you done or what are you going to do as Vision Fund 1 bridge fund are you looking at potential investors to help those in trouble in the light of this corona virus issue?

[Masayoshi Son:]

Unknown issue or sorry unknown virus or new virus from medical perspective analyzing DNA and leveraging AI faster more accurately, fighting against those viruses. There are some companies that have such a medical solution or technologies that could attack those unknown and new viruses and by us making investment in those companies, those companies could help attacking those viruses or even cancer cells. So for those companies investing in those companies and by them growing they could help people around the world to fight against diseases. So that kind of support we like to definitely do.

[Operator:]

And final question.

[Unidentified Analyst:]

[indiscernible]. I have a couple of questions. On Financial Times as of February 4, Michael Ronen will retire from SoftBank Visions Fund and he had some concerns about SoftBank Vision Fund. So could you confirm that retirement of that person or if there were some issues that first question?

[Masayoshi Son:]

There are several hundreds of employees there. In any organization every year some of them will retire and the same as our company SoftBank in the past as some tens of years every year some left, some comes in and those who left with what reason is case-by-case, their own thinking, their family situation, the health situation, their dreams, visions, there are many reasons there. So that I don't say good or bad or what is a reason good for leaving company or not whatever the organization is such people comes in and out occurs anyway.

[Unidentified Analyst:]

What is the issue that the Mr. Ronen is concerned about? How do you address?

[Masayoshi Son:]

I don't know what he concerned. I don't know about that. Me, I'm full of energy, no change and been investing. That's the situation.

[Unidentified Analyst:]

And I have another question about Oyo and WeWork. Large investment held by Vision Fund may not be used fully that's how I see the challenge is there especially when it comes to the internet business invest and take the share can be a good share powers for your business but the real estate which making a small agreements, a contract with each owners and landlords and so on doing such business may have a lot of challenges there. I believe numbers may be the pressure for Oyo from you, so that as a result that you may encouraging too much to pursue numbers. How do you think about that?

[Masayoshi Son:]

I don't feel that way. If people can grow they have a room to grow, I think money can be very useful and if we cannot use such possibility well then that can be a harm but generally speaking great technology great management and the great opportunities there then money is something necessary with not harm but rather necessary for the competition and that can be a good weapon if they can use wisely. Whatever the revolution is money always was necessary. In the past in the history whatever the revolution was always money was necessary and that was very useful whatever the battle was, whatever the revolution was I believe that's the case. So if you can use wisely you can create a great revolution with great size and you can increase the ratio of success rather than not having any money.

[Unidentified Analyst:]

One more question. Termsheet question. So whenever you invest, show the invest investment in tension with termsheet but sometimes you end up not investing in such company and that can be a quite harmful for start-up companies and I believe that has been covered by media. Can you build a good trust with those company?

[Masayoshi Son:]

I don't know – you know the definition of the termsheet but termsheet is just to show the condition to this negotiate with the counterpart with how much, with what revaluation on what timing you want to put the money in and for that condition we want to send take one board seat for example. If as long as your business plan goes based on your plan and there are many conditions there and termsheet also say this is not legal bindings. One out of 100 or two times out of 100 that termsheet may not reach to the final agreements and that happens everywhere. Not only us out of hundreds one or two that we may have such case. You just pick that one or two times and you cannot trust because of that. That's I think is misleading and that's not only happening in Vision Fund other venture capitals happens time to time. Two or three times out of hundred. In our case maybe two or three times out of 100 and that occurs after the due diligence in the process of due diligence. We could not reach to the agreements with you based on your business plan. Also a final decision will be decided based on our investment committee approval. Without investment committee approval like a board meeting in the enterprise without such approval. This termsheet we cannot keep the words 100% then what's the role for investment committee, what's a role for board meeting. Doesn't make sense. That's just ignoring the governance and we always having a limited partner observing our investment committee and have a discussion having a several opinions discussed maybe evaluation is too high, competition is too tough or there are such tough questions back and forth. Maybe two or three times out of 100 we decide not to invest as a result and that should happen and that's the governance I think. Just happened to be termsheet disagreed that doesn't necessarily mean that we have 200% keep that. That's I believe rather wrong or strange. That's why I would say two times or three times out of 100 maybe four, five times out of 100 we may exchange a termsheet agreed on that but still may not be reaching to the investment decision and I don't think that's a bad thing because that's unnatural things to do. Up until the last minute we never know termsheet for counterpart we explain that way clearly explained that especially these days that I'm asking each investment managers to make sure that termsheet does not have a legal bindings.

[Unidentified Analyst:]

Because Vision Fund didn't able to raise the money so that's why you break the termsheet?

[Masayoshi Son:]

Not at all. That's not the case at all. So we just pass the time quite. So tide is turning. That's the one word I would like to conclude my presentation and the meetings. Thank you very much.

[Operator:]

Thank you very much. This concludes the SoftBank Groups Corp. earnings results announcement for the nine-month period ended December 31, 2019. The video footage of this meeting will be distributed on demand from our website. Thank you very much once again for joining the SoftBank Group Corp. earnings results announcement for the nine-month period ended December 31, 2019. Those who are with us over the internet or by telephone thank you indeed for staying until the end of the meeting. Thank you once again very much.