SoftBank Group Corp.
Q4 2019 Earnings Call Transcript

Published: 13 May 2019

[Unidentified Company Representative:]

Thank you very much for waiting, ladies and gentlemen. Now we would like to start the SoftBank Group Corp. earnings results announcement for the fiscal year ended March 31, 2019. First of all, I would like to introduce today's participants. On -- from right, we have Masayoshi Son, Chairman and CEO of SoftBank Group Corp.; Yoshimitsu Goto, Senior Executive Corporate Officer and CFO; Kazuko Kimiwada, Executive Corporate Officer and Head of Accounting. This meeting is live broadcast over the Internet. Now I would like to invite Mr. Son, Chairman and CEO, to present to you the earnings results announcement announced and business overview.

[Masayoshi Son:]

My name is Son. Thank you very much for joining today. So since our foundation of the business, so many years has passed. I usually think that, especially around the year 2000 when we have Internet bubble. Our dream and the future vision of SoftBank was something that I was believed in, and many investors who bet on us. And we also made a trouble for them at the time of the Internet bubble. And that made me feel the responsibility whenever I think back. So for the long time, I made some troubleness and also -- or many people worried. And since then, we have spent so many years. So that's something that always reminds me or think about it. And that also hurt my feeling as well. Since then, Internet industry has grown so far. And actually, about seven out of ten companies of the number one in market caps are Internet companies. And amongst those, we are still very small company, and I'm still embarrassed to see our business is not large enough compared to those; and still not being able to provide big results to the investors, which is something that I still want to work on going forward. By showing the steady performance in the business of SoftBank Group one by one, I hope we will be able to live up to the expectations of the investors of ours. So based on that, I believe today this meeting shows, including our determination, that this will be our future vision of SoftBank Group. So I hope that you'll be sharing a good time with me. So now let me enter into the presentation graph. Can you tell what it is? Anybody who understands what this is? I believe that that would be a quite good understanding of SoftBank. Anybody who understands what this is? Is anybody there? Share price? No. It's not share price, something close but not share price. Anybody else? You don't know, right? It's really difficult. Back in year 1999. We had a peak at year 2000. This is the first phase of Internet journey of SoftBank. Second phase, this is the second phase. And this is the third phase. So you can see the first phase, second phase and third phase. Looks like share price, but it is not a share price. What do you think? So person who just said share price. Market cap? No, it's not market cap. Market cap and share price is almost a similar, same thing, right? Anybody else? Can you tell? It's quite difficult, isn't it? Please. Operating income? Close but not right, not quite. Anybody else? Investment assets value, portfolio, close. So let me answer. Let me give you the answer. Today's earnings results announcement, I will talk about the many details, but I want you to remember just one page. Others -- are just nothing. So you just please remember this one page. And I want you to remember this graph for today. Others are just minor thing. SoftBank Group shareholder value. So this is the most clear way of showing today's SoftBank Group. With this page, I believe we can talk about SoftBank Group. And this is per share basis, which gives you ¥21,688 per share. So shareholder value is ¥21,000 per share. And this graph, is anything that you believe that a similar trend? Do you see some similarity with other trend? Can you guess? Operating income? What do you think? Is it sales? Maybe you can think of many things, but actually for me this is it

[Unidentified Company Representative:]

Thank you, everyone. So we all know China has, is a big new car market. And compared with the new car market, the used car market in China is massive; is unmatured; and fast growth, growing, doubling every 5 to 6 years. And is very fragmented with over 120,000 small dealers, on average each 100 cars sold per year. China, we started 3 years ago and we are now or is a leading player in China. We sold 700,000 cars last year, and we doubled our revenue. And compared with small dealers, how can we grow that fast? The secret is we're trying to be more efficient. First, we're trying to connect individual sellers and individual buyers directly with no middleman. And we, that's why we call ourselves the endgame. And more important, we have AI-based algorithm engine. We're testing a lot of data. And with that data, we'll have the capability to predict for each typical car how long it takes, what's the chance for that car to be sold on our platform, at what price. And with that capability, we are more efficient. So how efficient? More efficient we are, compared with dealers. And inspection productivity, we're 4x more efficient. On sales productivity, we're 5 times more efficient. And more important, on the turnover we're 4x more faster. So for you to better understand all these, we'll have a video play... [Audio/Video Presentation] Thank you, everyone. I'll hand over to Masa. Thank you.

[Masayoshi Son:]

Thank you. Fantastic. Thank you. Guazi has already achieving the platform in the 700,000 cars per year, and that is the growth is doubling every year. So great scale, great speed and also taking advantage of AI to disrupt the industry. In United States or in Japan or in Europe there is no such company. This is the only one company I have found that -- using AI of the used car market platform. So I believe they will be able to make more surprises in the future. One other example that I would like to share with you today

[Unidentified Company Representative:]

Thank you very much. We'd like to go to question-and-answer session. If you have any question, please raise your hand and wait for the microphone. And please begin your question by stating your name and affiliation. We'd like to take up to 2 questions per person so that we can take questions from as many people as possible. Do you have any question? Interpreted The first, the blue gentleman that gave us answer, at the beginning of the presentation, about that graph.

[Operator:]

[Q - Toshihiro Yamada:]

My name is Yamada from Toyo Keizai. So ¥ 526.5 billion is coming in after the tender of Yahoo! Japan share. Does that goes to SoftBank Vision Fund 2? And then my second question is about Sprint and T-Mobile merger. It looks like the process is delayed. And what is your prospect, any change in strategy? Those are the two of my questions.

[Masayoshi Son:]

Yahoo! Japan. As for Yahoo! Japan, SoftBank Corp., we, our subsidiary, consolidated subsidiary. Mr. Ken Miyauchi has an eagerness to bring Yahoo! Japan to, under his company's umbrella and make their subsidiary and make a 100% synergy with Yahoo! Japan. And from Yahoo! Japan's point of view, they like to enhance the relationship with SoftBank Corp. e-commerce PayPay. Those business will be able to be stronger with the relationship. So both actually wants to go to that approach. And then my first word was that I understand how you feel, but if you make the structure, it looks like me, Masa, using you as my pocket or wallet and the parent like to use those money for my cash management. So there will be people criticizing me if we make that happen. So that's I don't want to see. So that's why I didn't really like that way. But those 2 CEOs of Yahoo! Japan and SoftBank Corp. still wants to do that. That's a kind of minor things. And Masa, please accept the criticism. It's that people is going to say whatever they say. So please accept the idea. And that's why that I end up accepting that idea and we made that happen. As a result, we responded to the tender offer for the share repurchase by Yahoo! Japan, and we are receiving proceeds and that to be used for the enhancement, on the improvement of the balance sheet of ours and also some preparation for the SoftBank Vision Fund 2 and also increasing in dividend for this time. So we were making a balanced use of the proceeds. And your second question, about Sprint and T-Mobile. Sprint earnings was announced about 2 day -- 1 days -- 1 day ago. And the business itself is doing smoothly and positively, although some difficulties are there, here and there. But when it comes to mid- to long-term strategy for 5G and so on, merger with T-Mobile

[Unidentified Company Representative:]

Next question?

[Unidentified Analyst:]

Hogane from Nikkei Computer's. May be related to the previous question. SoftBank KK and Yahoo! will strengthen relationship. And why don't you have them merge together? That might be better. Any idea around that?

[Masayoshi Son:]

Well, anything is possible, to be very blunt with you, but SoftBank KK's, Ken Miyauchi's management and Yahoo! Japan's management led by Kawabe, they discuss further to figure out what will be the best approach in the future. And the starting point is this structure. And going forward, what they should do is something that they will discuss further while watching how it goes.

[Unidentified Analyst:]

And another question, with regards to regulation in Japan about ride sharing. In July last year, you mentioned that it's ridiculous that ride sharing was banned legally, but the government has not really deregulate ride sharing market in Japan. But autonomous driving and AI, from those perspective, is very important topics, so any opinion about Japanese government approach?

[Masayoshi Son:]

Well, my thought remains the same. Too much regulation will slow down evolution of things. And in Japan automobile industry has significant portion of Japan's GDP. And how many Japanese companies are there that we can proud of? And that growing -- or that industry might not survive anymore if autonomous driving or [MaaS] and industry can't catch up with that trend. So there is tons of risks. So small [just] and big just . And policymakers and regulators, I hope that they figure out what's the ground that we should protect in Japan and what's consumers will ask for most. Industry grows only when consumers want them to grow. There is a demand from consumers. That's when and where industry grows. So again, I hope that regulators and policymakers and politicians will keep watching what's happening around the world before making the best decision for Japan. Either way, from a SoftBank perspective, we started investing in ride sharing business not because we rely on potential growth in Japan, but that industry has been growing already outside Japan. That's why we decided to invest in ride sharing industries. So whether Japanese government deregulates the market or not, from SoftBank's perspective, it doesn't mean a lot. We are sad because our -- Japanese consumers don't enjoy the benefits. That's why.

[Akito Tanaka:]

My name is Tanaka from Nikkei Computer. So QR payment settlement is now expanding, and I believe SoftBank is also putting efforts in PayPay. So payment data, what is the value of having a payment data? Or what is the impact of having a payment data?

[Masayoshi Son:]

Yes. Thank you for your question. Payment data is very important and also important for the base of the AI data. Without payment data, you don't know or you cannot understand the flow of money. And that cannot be utilized for the prediction by AI data. So that's how I feel. From that sense, China is leading this area and realizing this payment world. Actually, compared to U.S. or compared to Japan or compared to any other place, China is leading this area. Southeast Asia or India, those area are actually taking one step ahead compared to United States using QR code payments and so on. And that, I believe, Japan should not be left alone. And even United States now already seen as a kind of a leaving behind. So why don't we go to the person in the back?

[Unidentified Analyst:]

Yamashita from Yomiuri newspaper. Mr. Eiichi Shibusawa, which is going to be printed on the new ¥ 10,000 bill. And I remember you mentioned that Mr. Eiichi Shibusawa was 1 of the 4 people that you respect. And Eiichi Shibusawa, the companies that Mr. Eiichi Shibusawa was involved have been here in Japan for a long time. So I wonder if you want, still want to be like Mr. Shibusawa or as a SoftBank Group. Or some people call SoftBank Group as Internet [indiscernible] or conglomerate. So what's your thought about conglomerate?

[Masayoshi Son:]

And I believe that there are a lot of good things about Japan's conglomerates. And Mr. Shibusawa's companies, or Mr. Shibusawa's motto is great, but SoftBank Group, our group of AI entrepreneurs strategy is a tool for us to evolve differently. We are not going to copy their strategy. We want to evolve different from how Mr. Shibusawa did. And why do we want to do this? I won't comment on that because it may, it might sound very selfish, but by focusing on AI and by focusing on Information Revolution and by focusing on number 1 companies around the world, by putting them together, and intentionally, we are not going to take 51% of holding. So we deliberately take anti- [indiscernible] approach. So that's how we want to grow differently.

[Unidentified Analyst:]

So you changed your mind. Because 10 years ago, you wanted to be like Mr. Shibusawa.

[Masayoshi Son:]

Well, it doesn't mean I copy him. So we want to evolve in a different way.

[Unidentified Analyst:]

So in a constraint of time, we want to limit number of people that can make a question. Two people and one question per each.

[Unidentified Analyst:]

My name is Samfrom Reuters. Regarding the Vision Fund 2, I have a question. Who have you been discussing with for -- as an investor? Is it Oman or Saudi Arabia's? Have you started negotiation or discussion with them?

[Masayoshi Son:]

Can you keep the question to one?

[Unidentified Analyst:]

No. That really is my first question. Regarding the Saudi Arabia, there was an accident about Mr. Khashoggi which happened about 6 months ago. And Mr. Son mentioned that the money is not -- is from the nationals of Saudi Arabia. And also you said that you're going to explore once again that once the fact is investigated, but time has passed quite a long time. And I believe that we all quite understand that what has happened. Have you or have you understand well?

[Masayoshi Son:]

For the investors of Vision Fund 2, what kind of companies or what kind of organization are participating? That is your question, and when and how and how much size? Those are still early to discuss at this occasion, so I don't want to be specific to any individual or any details about that. So please go to the next question.

[Unidentified Company Representative:]

Nigi-san? I know your name. I remember your name. Thank you.

[Unidentified Analyst:]

Until Vision Fund 2 is launched, how can you keep your passion level or energy level? Maybe IPO of Vision Fund 1 as an option, for example. What's your thought?

[Masayoshi Son:]

Well, Vision Fund 2, well, relatively early stage. I think I can predict Vision Fund 2 will be launched rather soon. By that, what I mean is effectively there should not be huge gap between SoftBank vision 1 and SoftBank Vision Fund 2 in terms of timing. So we want to ensure smooth start of SoftBank Vision Fund 2's investment. So we will -- we are most likely start tentatively. One option is have SoftBank Group having 100% as a start and invite other investors later. So that's one option to make sure that we can start investing with Vision Fund 2 as early as possible. With regards to passion about Vision Fund 2, I think 97% of my passion goes to Vision Fund. So my brain and my heart, almost everything about myself is focusing on Vision Fund. IPO, well, there are some rumors around IPO, but I can't make a comment now.

[Unidentified Company Representative:]

So maybe the last, very last person for the question.

[Unidentified Analyst:]

My name is from [Yamaka] from World Business Satellite. Toyota market cap is ¥21 trillion. EBIT at SoftBank is almost the same with them. And you mentioned about discount. Market cap, probably you're -- you could go over Toyota. How do you think about that?

[Masayoshi Son:]

Toyota is a world-class, great and respectful company. And they have their very steady, robust position. And also they are our partner as well in business, so we -- I'm very respect of this company. So it's not like exceeding or not exceeding. That's not a level that we should be discussing. But so Toyota also mentioned that they would like to evolve their business as much so that -- we would like to see their further growth. And also us, our own business, we would like to grows ourselves as well. So thank you very much. That it. Well, thank you very much. That's about time, so we would like to close the earnings results announcement. Thank you very much once again.

[Unidentified Company Representative:]

Thank you. This concludes the SoftBank Group Corp. earnings result announcement for the fiscal year ending March 31, 2019.