Japanese telco SoftBank Corp said on Wednesday it would spend $4 billion to up its stake in Yahoo Japan Corp and turn the internet company into a subsidiary, a move that would help boost its profit by 24 percent this year.
The telco said it would buy 456.5 billion yen ($4.2 billion) worth of new shares to be issued by Yahoo Japan, increasing SoftBank Corp’s stake to 45 percent from 12 percent.
With that addition, SoftBank Corp, which listed in December in Japan’s largest-ever initial public offering, forecast its operating profit would rise to 890 billion yen in the current financial year through March 2020.
SoftBank Corp will buy the shares at 302 yen each, or a 2.3 percent discount to Wednesday’s closing price.
Separately on Wednesday, SoftBank Corp’s parent SoftBank Group Corp said it would sell its 36 percent stake in Yahoo Japan back to the internet company.
The deal will strengthen cooperation between SoftBank Corp, Japan’s third-largest telco, and Yahoo Japan, an internet heavyweight in areas such as news and shopping.
The closer relationship will help drive growth at shared ventures such as QR code payment app PayPay, SoftBank Corp Chief Executive Ken Miyauchi said at a news conference.
Concern over the outlook for Japan’s telcos, which face government pressure to cut carrier fees as well as competition from new entrant Rakuten Inc, has kept SoftBank Corp shares below their IPO price. The stock closed up 0.6 percent ahead of the earnings.
Some analysts see the telco as well positioned to weather the price squeeze as it targets data-heavy smartphone users with premium-priced plans while offering low-cost options for thrifty customers under separate branding.
The telco reported a 17 percent drop in fourth-quarter operating profit to 84.5 billion yen from a year earlier, even as revenue grew. The result missed the 93 billion yen average of three analyst estimates compiled by Refinitiv.
SoftBank Corp, with its ample cashflow, is a key indicator of the health of parent SoftBank Group, which reports its fourth-quarter earnings on Thursday.