Doubts over Softbank recovery plan

A change in the way Softbank counts its subscriber numbers saved it from having to declare a net reduction in October, raising doubts about whether the Japanese group can turn round the ailing mobile business it bought from Vodafone Japan in March.

The telecommunications group was able to report a net gain in subscribers only by extending the period for which it counts inactive users from six months to a year, according to an investigation by the Financial Times. This allowed it to include prepaid subscribers who had not used their mobile phones for nearly 12 months. Japan’s other big mobile operators generally use three months as the cut-off period.

Analysts said the extension boosted the October numbers by 30,000-35,000. Without the change, Softbank’s reported net addition of 23,800 subscribers to 15,330,800 in October would have been replaced by a net loss of at least 5,000 subscribers, the first since May 2005, when Vodafone still owned the business.

Softbank said that the change in methodology, introduced on September 1, was an improvement to its customer service levels because it allowed inactive customers to keep the same number for almost a full year should they decide to start using their phones again.

However, the company would not reveal to the FT its estimate of the difference the change had made to declared subscriber numbers.

Makio Inui, telecoms analyst at UBS, said he had also asked Softbank how much difference the change in calculation would make, but the company would not disclose figures.

Mr Inui said the company was likely to have suffered further net defections to other carriers in November because of the introduction of number portability, which allows customers to change from one operator to another without having to change their mobile number.

But he said Softbank was having more success in adding customers new to the mobile market, which would boost its overall subscriber figures.

The Japanese communications group, which last week secured a Y1,450bn ($12.5bn) loan through a securitisation of the mobile business, is under pressure from lenders to show an improvement in its performance. The loan is understood to include various operational targets, including subscriber growth.

Softbank had confidently predicted in October that the arrival of number portability would boost its market share by making it easier for customers who were dissatisfied with its rivals to switch. However, the disclosure of the change in methodology suggests that its market share may be moving in the opposite direction.