SoftBank picks Arora to drive 'second phase' of growth

For three decades, it was Masayoshi Son who came up with the "crazy ideas" and made huge, high-risk investments that saw SoftBank grow from a little known Japanese telecoms company into a global technology empire.

Now as the company gears up to become an even bigger global powerhouse, Mr Son is turning to the man he views as his successor: Nikesh Arora.

In an earnings briefing on Monday, Mr Son announced that he had picked the 47-year-old former Google executive as his "top candidate" to succeed him. He will relinquish the title of president to Mr Arora, SoftBank's vice-chairman who leads the group's investments, while Mr Son will remain as chief executive and chairman. The transition is expected to take place in mid-June.

"I'm not retiring yet," said 57-year-old Mr Son. But he added, "Is (Nikesh) effectively my successor? The answer is, 'Yes.'"

Since poaching the man who was Google's former head of business last July, Softbank has significantly stepped up its pace of investment in tech start-ups.

Over the past six months, it has been involved in deals totalling over $2bn, including a $250m stake in GrabTaxi, a southeast Asian taxi-hailing app, and a $627m acquisition of Indian online marketplace Snapdeal.

Last week, it was announced that it had also invested $100m in Banjo, a Silicon Valley social networking-meets-data analytics company.

"This year will be a very important year of transition," Mr Son said.

"Until now, it was Japan's SoftBank. From here, overseas will become main," he added, with Mr Arora leading the push.

Analysts say Softbank's management reshuffle is in line with the company's moves to become a more a global business. "It was a stretch for the people running Japanese operations to oversee global investments. The new management line-up basically aligns with where the company has already been heading," says Satoru Kikuchi, analyst at SMBC Nikko Securities.

With the Japanese domestic telecoms business generating stable cash flow, SoftBank's main focus will be to create a portfolio of technology companies.

"The true way to create a sustainable, long-term company is to actually find those passionate entrepreneurs and support them in a very strong way," Mr Arora said.

With successful investments in Chinese e-commerce group Alibaba and Yahoo Japan, Mr Son has already earned a nickname of Asia's equivalent of Warren Buffet. But analysts do not see SoftBank turning into a pure investment company or an internet conglomerate going after new technologies and markets.

"They are not Google or Alibaba. It is a hybrid model," says Kirk Boodry, an analyst at New Street Research.

Mr Son is counting on Mr Arora's deep connections in the tech industry and expertise. But analysts say his track record remains unknown, and investments in start-ups is high risk has some unusual risks.

Earlier this month, SoftBank averted the first dotcom implosion of India's new internet boom by persuading the chief executive of start-up Housing.com to retract a scathing resignation letter, in which he slammed his investors as "intellectually incapable".

In announcing the company's full-year earnings results, Mr Son also did not provide a guidance for the current fiscal year through March 2016, saying it was difficult to give a target given its frequent investment activity including both acquisitions and sell-off of assets.

But the management reshuffle comes as SoftBank struggles to turn round its loss-making Sprint unit, the third­-largest US wireless network it acquired for $22bn in 2013.

For the 2014-2015 financial year, SoftBank's operating profits fell 8.8 per cent to Y982.7bn ($8.2bn), partially due to costs of shedding headcount at Sprint.

Last week, the US company reported a loss per share of 6 cents in the first three months of the year and continues to burn through cash, with net debt rising by $900m to $29.6bn.

And while Mr Son seeks to shift SoftBank's focus to internet companies, analyst say Sprint remains an Achilles heel.

Mr Son admitted he had felt uncertain about Sprint's turnround prospects only three months ago, acknowledging again on Monday that the company faced "a load of challenges."

But he denied there was any specific plan to sell SoftBank's stake in the company.

Still, he said Sprint was developing a next-generation mobile network that he saw as promising.

"I'm starting to see the path to recovery. I've regained my confidence," Mr Son said.

Shares in SoftBank rose 0.6 per cent ahead of the results, which came out after the market close, while the Nikkei rose 1.3 per cent.

Nikesh Arora: from Google to Masayashi Son's right-hand man

Nikesh Arora's growing importance at SoftBank is underscored by the fact that Masayoshi Son calls him the moment he wakes up and before going off to bed. "He's ten years younger than me, but he is more capable and he has a great personality," Mr Son said.

The appreciation is mutual. Mr Arora compares Mr Son to Google co-founders Sergey Brin and Larry Page. "In my mind, Masa is equivalent as a business innovator as Larry and Sergey are technology innovators," he says.

After a ten-year career at the US technology group, during which time he became the internet group's top business executive, Mr Arora joined Softbank as vice-chairman and and chief executive of SoftBank Internet and Media (SIMI), a US-based unit of the group launched to oversee and manage its investments in other technology companies.

Although Mr Arora is principally known for leading the group's investments, analysts say he is also likely to play a bigger role at Sprint. He headed T-Mobile's European operations before joining Google in 2004, and joined the board in November.

Kirk Boodry, an analyst at New Street Research, says he is already working with executives at the US wireless carrier to help turn it round.

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