SoftBank's son defends links with Saudi Arabia while a kingdom-backed fund increases its profits

TOKYO (Reuters) – SoftBank Group Corp (9984.T) Chief Executive Masayoshi Son on Monday condemned the killing of a journalist by Saudi security personnel, and said his company should shoulder its responsibilities to the citizens of the kingdom whose money is invested in its Vision Fund.

Saudi Arabia is the largest investor in the fund launched last year with a capital of more than $ 90 billion, which allowed Son to make a big deal for start-up companies, such as the supplier of WeWork Cos shared workspaces and the OYO hotel chain.

The worldwide outcry provoked by the murder case has, however, led many observers to consider this dependency as a risk for SoftBank's plans to raise additional funds.

"These funds are important for the Saudi people to diversify their economy and no longer depend on oil," his son said on Monday.

"It is true that a horrible incident occurred. On the other hand, we have a responsibility to the Saudi people and we must fulfill our responsibility rather than turn their backs on them. "

His son presented the results of SoftBank, appearing before reporters for the first time since Jamal Khashoggi, a journalist critic of the Saudi state, was murdered early last month in the Saudi consulate in Istanbul.

SoftBank posted operating profit of 705.7 billion yen ($ 6.23 billion) between July and September, thanks to higher valuations on high-tech bets by the Vision Fund, a Saudi fund. This compares to 395.6 billion yen a year ago under different accounting standards.

(Click for the graph illustrating Vision Fund's growing contribution to SoftBank tmsnrt.rs/2RAwtfI)

His son said that there was no indication that SoftBank's Saudi ties deter startups from accepting capital, the View Window Company, connected to the Internet, announcing Friday an investment of 1 , $ 1 billion from the Vision Fund.

And there are still plans to raise additional funds, said Son, although he pointed out that SoftBank will act with caution and wait for the outcome of the Khashoggi case.

Concern over the fallout in Saudi Arabia and the general decline in global technology stocks weighed on SoftBank's shares. They closed Monday at 8,747 yen, down 24% from the peak of 11,500 yen in September.

IPO WORRIES

The planned IPO of SoftBank's national mobile phone unit, prompted by pressure from the Japanese government on the Japanese telecom industry to lower prices, is another source of recent concern.

Market participants said the bid could exceed the record $ 25 billion worth of shares sold by China's Alibaba Group Holding Ltd. (BABA.N) in New York in 2014.

(Click for a table of the most important IPOs in Japan and in the world tmsnrt.rs/2NyR45I)

The IPO will mark the transformation of SoftBank's national telecommunications company, which has challenged the duopoly in place of the country, into one of the largest technology investors in the world.

While the offer is expected to attract cash-rich Japanese retail investors, attracted by SoftBank's image as a successful technology company and the prospect of stable returns, it comes as the government advocates cost-cutting.

In this context, NTT Docomo Inc (9437.T) announced last week a reduction in its management fees of up to 40%, affecting its profits next year.

Separately, competition is expected to increase as e-commerce giant Rakuten Inc (4755.T) enters the mobile market in a year thanks to a merger with telecommunications company KDDI Corp. (9433.T)

His son dismissed these worries on Monday, saying he was keen to maintain growth in sales and profits of the SoftBank mobile unit and pay a high dividend.

Despite all the pressure from the government, SoftBank will increase automation and downsize mobile operations by 40% over the next two to three years, focusing instead on new areas of growth, said Son. .

The unit serves as a gateway to Japan for many portfolio-owned SoftBank companies, operating joint ventures such as offices shared with WeWork, taxis with Didi Chuxing in China, and a QR code payment company using Paytm's technology. India.

($ 1 = 113,2500 yen)