Softbank not so “soft” at core

Yesterday Japan’s Telecommunications Carriers Association (TCA) announced mobile phone subscriber statistics for October. It did not contain much surprise to see KDDI (9433.T) made a leap to becoming No. 2 carrier in Japan since we expected it would benefit from being a new vendor to Apple’s IPhone. But it was a surprise to see Softbank (9984.T) not giving up any ground as it was losing its exclusivity.

Total new subscribers for October 589,200 was 13% lower than September but still a healthy 17.6% above the same period last year. Softbank kept its leadership in dominating the new subscribers, 19 months in row now, with a 40% share (247,600 new subscribers). KDDI jumped to the second place and leaped to a 33.4% share or 196,900 subscribers while NTT Docomo (9437.T) slid to the third at 15.21% share– a status previously occupied by KDDI.

Despite the major gains in new subscribers, the market was not impressed by KDDI’s inability to take over Softbank—the exclusive vendor for Iphone until October. Softbank’s marketing know-how, or KDDI’s lack of it, may provide too formidable to beat. Subscribers from existing user (MNPs) show 68,700 new registrations- an almost 1 year 4 months high for KDDI. Softbank gained 6600 new MNP users and Docomo was the net loser with -75,400.

It is too early to call a clear winner from KDDI’s entry to the Iphone market. They have been selling for only few weeks, and we do not know the full cost of Softbank’s ability to keep its clients. Nevertheless, the company seems to be the only telecom operator in Japan capable of creating excitement for its shareholders. It has outperformed its two rivals since November 2008 despite a high PBR and low dividend yield.

Since this April Softbank has been an underperformer in response to a series of downgrades by analysts who reportedly argued that the company’s mobile business was now mature. If it proves its resilience with respect to its growth, the stock may embark to another round of outperformance.

Have a good day

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