Softbank, Internet and Mobile Phone Company, Reports 66 Percent Drop in Quarterly Profit

Softbank Corp., an Internet services company and mobile phone carrier, said Thursday its net profit fell 66 percent in the most recent quarter due to hefty sales promotion costs.

Net income totaled 7.494 billion yen (US$61.93 million; euro47.69 million) in the October-December period, down sharply from 22 billion yen in the same period a year before.

Softbank, which acquired Vodafone Group PLC's Japan unit last April, said sales more than doubled to 702.19 billion yen (US$5.80 billion; euro4.47 billion) from 287.47 billion yen a year before.

Despite the jump in sales, higher costs for promoting its broadband Internet services and mobile phones eroded earnings, Softbank's Chief Executive Officer Masayoshi Son told reporters.

"A variety of sales campaign costs are affecting our earnings," Son said.

During the latest period, Softbank spent 227.30 billion yen (US$1.88 billion; euro1.45 billion) in marketing expenses and other general administrative costs, up from 79.40 billion yen disbursed the same period a year earlier.

Softbank Mobile, currently the No. 3 carrier in Japan by subscribers after NTT DoCoMo and KDDI, is pitching to increase its subscribers since the start of number portability in Japan in October.

During the quarter, Softbank Mobile added 189,000 subscribers to bring its total to 15.49 million by year-end, the company said.

Softbank ran into some trouble late last year over its advertising campaign during the October introduction of mobile number portability, which allows users to switch carriers but keep their phone numbers.

The Fair Trade Commission forced Softbank to modify the content of its advertising after the commission found them misleading. The ads highlighted free calls and e-mail between Softbank customers, but used extremely fine print in a small space to specify conditions for the free service, including valid time periods.

Softbank, which also owns the Fukuoka Softbank Hawks professional baseball team, bought the fixed-line company Japan Telecom Co. and the Japanese unit of British telecom Cable & Wireless PLC., both in 2004. Softbank has also online gaming, shopping and electronic stock trading units.

Softbank's fixed-line sales rose 5 percent to 93.71 billion yen (US$774.48 million; euro596.35 million), from 90.25 billion yen a year ago, but its operating revenue loss widened to 2.60 billion yen (US$21.51 million; euro16.56 million) in deficit, compared with a net loss of 1.78 billion yen.

Softbank shares closed 1.05 percent down to 2,820 yen (US$23.31) on the Tokyo Stock Exchange.