SoftBank's Q3 operating profit rises 71pc on the back of Sprint

Tokyo-based telecom and Internet giant, Softbank has posted its third quarterly earnings and even though the company managed to beat the expectations by a margin, it has reported a loss of $351 million in two of its biggest bets in India, Ola and Snapdeal.

In the third fiscal quarter, Softbank posted an operating profit of 295 billion yen, whereas Thomson Reuters analysts were expecting the company to report nearly 246.3 billion yen in this quarter. Compared to last year's 172 billion yen from October-December period, the company witnessed a 71 percent jump this year.

The net profit for SoftBank came out at 91.2 billion yen when compared to 2.29 billion yen in the same quarter previous year. The revenues for Q3 2017 stood at 2.30 trillion yen, which is slightly lower than 2.38 trillion yen, last year.

The company is giving the profit credits to Sprint, the U.S telecom which was acquired by Softbank in 2013 for $22 billion. Sprint has been trimming its losses each quarter. The losses for the third quarter was $479 million down from $836 million last year, with the operating level building further pressure by moving to $311 million from a loss of $197 million. The revenue numbers also managed to increase from $8.1 billion to $8.5 billion in the quarter ended December 2016.

In the same report, the company also posted $350 million in loss ‘recorded as the amount of change in the fair value of the Company’s investments, primarily in India.” The valuation decline in nine months ended December 31, 2016, compares with a gain of 108.4 billion yen ($965.1 million) in the year-ago period, according to the company’s earnings report.

In Jasper Infotech-owned Snapdeal, SoftBank had led a $627-million investment, whereas the ANI Technologies-operated Ola received $210-million investment in 2014.

SoftBank said, “Gain or loss arising from financial instruments at FVTPL comprises mainly of changes in fair value of preferred stock investment including embedded derivatives, such as ANI Technologies and Jasper Infotech Private Limited in India, designated as financial assets at FVTPL.”

Though these losses can be attributed primarily to currency fluctuations and accounting norms, the loss comes at a time when both the companies are reportedly looking to raise fresh funds. According to the Indian Express report, Ola has been trying to raise around $400-500 million "but has not evinced the interest of the investors at the valuation of $5 billion".

Recently, Vanguard World Fund marked down the value of its shares in Ola by 41 percent, which brought company's valuation down from $4.3 billion to $2.5 billion. On the other hand, Snapdeal raised $200 million in February 2016, bringing the valuation to $6.5 billion.