SoftBank Group Corp. (“SBG”) and its subsidiaries and associates (collectively, the “Group”) operate in a wide range of markets in Japan and overseas, and therefore face a variety of risks in its operations. The major risks envisaged by the Group as of June 21, 2018 that could significantly affect investors' investment decisions are outlined below. If any of these risks were to emerge, the securities issued by SBG, such as shares and corporate bonds, could fall in value or otherwise be impacted. Moreover, these risks do not include all of the risks that the Group could face in the course of carrying out its future business operations. Forward-looking statements were determined as of June 21, 2018, unless otherwise stated.
(1) Economic conditions
Demand for services and products provided by the Group (including but not limited to telecommunications services and Internet advertising) is subject to economic conditions, mainly in Japan, the U.S., and China. Therefore, deterioration of the business climate in each country and changes in the economic structure attendant on demographic changes, such as the aging and decline in the population in Japan, could impact the Group's results of operations.
(2) Foreign exchange rate fluctuations
In the preparation of SBG's consolidated financial statements, local-currency based revenues and expenses of Sprint and other overseas group companies are converted into Japanese yen at the average exchange rate for each quarter, and their assets and liabilities are converted at the exchange rate on the last day of the quarter. Consequently, fluctuations in the foreign exchange rate could impact the Group's results of operations and financial position.
The Group invests in overseas companies. If the Group sells its foreign currency-denominated assets when the yen has changed significantly in value from the time of investment, it may incur foreign exchange losses, which could also impact the Group's results of operations.
(3) Management team
Unforeseen situations concerning key members of management — especially Chairman & CEO of SBG and Group representative Masayoshi Son — could impede the Group's business development.
(4) Response to technology and business models
The Group's primary business domain is the information industry (including but not limited to the telecommunications industry and the semiconductor industry), which is subject to rapid changes in technology and business models. If for some reason, the Group is unable to develop or introduce technologies or business models that are up-to-date or that appropriately reflect market trends, its service offerings could lose competitiveness in the market, which could make it difficult to acquire and retain customers. This could impact the Group's results of operations.
In certain instances, the Group's competitors (including but not limited to new entrant or existing mobile network operators and mobile virtual network operators) may have a competitive advantage over the Group in terms of capital, technology development capabilities, price competitiveness, customer base, sales capability, brands, or public recognition, for example. If these competitors were to sell services and products that harness these competitive advantages to a greater extent than at present, the Group may be placed at a disadvantage in sales competition, or may be unable to provide services and products, or acquire or retain customers as anticipated. This could impact the Group's results of operations.
Moreover, the Group's competitive edge may be diminished if the Group's competitors deploy equivalent or better services and products to those the Group had introduced ahead of its competitors or those which were highly competitive at the time of introduction by the Group. This could impact the Group's business development and results of operations.
Regarding the domestic telecommunications business, in addition to existing mobile network operators, namely SoftBank Corp., NTT DOCOMO, INC., KDDI CORPORATION, and Okinawa Cellular Telephone Company, spectrum was allocated to Rakuten Mobile Network, Inc., as a new mobile network operator in April 2018. In the future, new entrants could cause a decline in the Group's competitiveness or in the profitability of the telecom market, which could have an impact on the Group's results of operations and financial position.
(6) Capacity enhancement in telecommunications networks
To maintain and enhance the quality of telecommunications services, the Group must continuously increase the capacity of its telecommunications networks based on predictions of the amount of future network traffic. The Group thus plans to systematically increase network capacity. However, if the actual amount of network traffic were to drastically exceed the Group's predictions, or if the Group were not to carry out network capacity enhancement (including but not limited to securing the required spectrum), service quality could be adversely affected, making it difficult to acquire and retain customers. In this case, the Group would also need to execute additional capital expenditure. These outcomes could impact the Group's results of operations and financial position.
(7) Dependence on management resources of other companies
a. Use of facilities, etc., of other companies
The Group makes use of certain telecommunications lines and facilities owned by other operators when constructing the telecommunications networks required for providing telecommunications services. The Group's business development and results of operations could therefore be impacted if for some reason it becomes difficult to continue to use those facilities, or if utilization or connection rates for those facilities were to be increased.
b. Procurement of various equipment
The Group procures telecommunications equipment, network devices, and so forth (including but not limited to mobile devices and radio equipment for mobile phone base stations) from other companies. The Group may be unable to switch suppliers or equipment in a timely manner should problems occur with the procurement of equipment in a case where the Group relies heavily on a specific supplier. Such problems could include supply interruptions, delivery delays, order volume shortfalls, and defects. Suppliers may also cease to provide the maintenance and inspection services required for telecommunications equipment to maintain performance. Either of these situations could impede the Group's provision of services, making it difficult to acquire and retain customers, or cause the Group to incur additional costs for changing a supplier, or cause a decline in sales of telecommunications equipment. This could impact the Group's results of operations.
c. Consignment of operations
The Group consigns sales activities, acquisition and retention of customers mainly for telecommunications services, and the execution of other related operations in whole or part to subcontractors. The Group's business development could therefore be impacted if for some reason these subcontractors are unable to execute operations in line with the Group's expectations.
The Group also has networks of subcontractors responsible for the sale of the Group's services and products. Damage to the credibility or image of these subcontractors would also have a negative impact on the Group's credibility or corporate image. This could hinder business development and the acquisition and retention of customers, which could impact the Group's results of operations. Furthermore, if these subcontractors should fail to comply with laws and regulations, the Group could receive a warning or administrative guidance from the regulatory authorities, or be investigated for non-fulfillment of its supervisory responsibility, and the Group's credibility or corporate image could deteriorate as a result, making it difficult to acquire and retain customers. These could impact the Group's results of operations.
d. Business alliances and joint ventures
The Group develops its business in Japan and overseas through business alliances, joint ventures and so forth with other companies. If these partner companies should have a significant change of business strategy or these business alliances or joint ventures experience a material deterioration in its results of operations or financial position, it is possible that anticipated results may not be obtained from the partnerships or that it may become difficult to continue the business alliances or joint ventures. In addition, it is also possible that execution of business alliances or joint ventures with a particular third party could preclude the execution of business alliances, joint ventures and so forth with other parties. Such events could impact the Group's business development and results of operations.
e. Use of Yahoo! brands
In Japan, the Group makes use of Yahoo! brands belonging to U.S. company Verizon Communications Inc. in certain service names such as Yahoo! JAPAN, Y!mobile, Yahoo! Keitai, and Yahoo! BB. If the Group were to become unable to use these brands due to a drastic change in its relationship with Verizon Communications or other reasons, the Group may be prevented from developing businesses as anticipated.
(8) Renewable energy business
In renewable energy business, the amount of power generated could be lower than anticipated due to weather conditions such as sunlight and wind force. Moreover, if power generation facilities or facilities for connecting with power company transmission lines become faulty as a result of damage from a natural disaster or other event, the amount of power generated and the amount of power sold could decline dramatically. These could impact the Group's results of operations.
(9) Information leaks
In its business operations, the Group handles customer information (including personal information) and other confidential information. This information could be leaked, lost, or involved in a similar incident, either intentionally or accidentally by the Group (including officers and employees of the Group and people related to subcontractors), or through a malicious cyber-attack by a third party or other means. Such an occurrence could damage the Group's competitiveness, and incur significant costs to the Group for payment of damages and modification of security systems, in addition to having an adverse impact on the Group's credibility or corporate image and making it difficult to acquire and retain customers. These outcomes could impact the Group's results of operations.
(10) Service disruptions or decline in quality due to human error and other factors
In its provision of various services, including telecommunications services, there is a possibility that a major problem could occur if the Group were to become unable to continuously provide the services, or suffered a decline in the quality of the services, due to human error, serious problems with equipment or systems, or other causes. If such disruptions or declines in quality were to become widespread and/ or significant time were required to restore services, the Group's credibility or corporate image could deteriorate, making it difficult to acquire and retain customers. This could impact the Group's results of operations.
(11) Natural disasters, accidents and other unpredictable events
The Group constructs and maintains telecommunications networks, information systems, and other systems necessary for the provision of various services, including Internet and telecommunications services. Natural disasters, such as earthquakes, typhoons, hurricanes, flooding, tsunamis, tornadoes, heavy rainfall, snowfall, or volcanic activity, other unexpected disruptions such as fires, power outages or shortages, or incidents such as terrorist attacks, cyber-attacks, unauthorized access or infection by computer viruses could interfere with the normal operation of telecommunications networks and information systems and others. This could hinder the provision of various services by the Group.
If these impacts were to become widespread and/or significant time were required to restore services, the Group's credibility or reputation could deteriorate, making it difficult to acquire and retain customers. Moreover, significant costs may be incurred by the Group for recovery and repair of the telecommunications networks, information systems, and others. This could impact the Group's results of operations.
Moreover, regarding Arm business, Arm's technology is used in billions of consumer and enterprise products, many of which are used to store, manage, or transmit huge amounts of personal information and confidential information. Further increases in the complexity of Arm's technology could increase the likelihood of a fault or bug. A fault or bug associated with one of Arm's products could result in deterioration of Arm's credibility or corporate reputation and damage to Arm's brand value.
In Japan, the head offices and business offices of various group companies are concentrated in the Tokyo Metropolitan Area. The possibility therefore exists that a major earthquake or other force majeure event in the area could incapacitate these business locations, impeding the continuity of the Group's business.
(12) Fund procurement and leasing
The Group procures the funds it requires for developing its business by borrowing from financial institutions, issuing corporate bonds, and other sources. The Group also executes capital expenditure utilizing leases. The cost of procuring funds could increase because of rising interest rates or a decline in the Group's creditworthiness stemming mainly from a downgrading of the credit ratings of SBG or its subsidiaries due to a deterioration in results of operations or the release of guarantee provided by SoftBank Corp. with respect to existing debt. Such an increase in fund procurement costs could impact the Group's results of operations. Furthermore, the Group may be unable to procure funds or structure leases as planned due to a long-term, significant decrease in the value of assets, such as shares owned by the Group; financial market conditions; or the credit standings of SBG or its subsidiaries. This could impact the Group's business development, results of operations, and financial position.
The Group may sell some of its assets or take other measures to secure resources for repaying the procured funds (excluding the debts non-recourse to SBG). This could impact the Group's results of operations and business development.
In addition, various covenants are attached to the Group's borrowings from financial institutions, corporate bonds, and other transactions. If the potential arises for any of these covenants to be breached and the Group is unable to take steps to avoid breaching them, the Group could forfeit the benefit of the term relating to the obligation concerned, and in conjunction with this forfeit the Group could be requested to repay other borrowings in one lump sum payment as well. As a result, the Group's financial position could be impacted.
(13) Investment activities
The Group conducts investment activities for the purpose of setting up new businesses and expanding existing businesses in order to form a group of companies with a shared vision to realize long-term, continuous growth. Such activities include corporate acquisitions, establishment of joint ventures and subsidiaries, and acquisitions of interests in operating companies or holding companies (including companies that effectively control other companies through various contracts) and funds. For example, SBG acquired U.K. company Arm in September 2016. Furthermore, SBG (directly and through its subsidiaries) makes investments as a limited partner in SoftBank Vision Fund and Delta Fund, each of which is managed by one of SBG's overseas subsidiaries. For major risks related to investments in the funds, see “(14) SoftBank Vision Fund and Delta Fund.”
If an investee is included in the Group's scope of consolidation in conjunction with these investment activities, this could impact, negatively at times, the Group's results of operations and financial position. In addition, if an investee is unable to conduct its business as anticipated at the time of investment, the Group's results of operations and financial position could be impacted, for example, through write-downs on assets recognized in conjunction with investment activities including goodwill, property, plant and equipment, intangible assets, or financial assets such as shares. In addition, any decline in the value of assets that were obtained through these investment activities, including investment equities, could cause SBG to recognize a valuation loss, which could have an attendant impact on SBG's results of operations and distributable amount in non-consolidated financial statements.
For example, for the fiscal year ended March 31, 2018, the Group recognized impairment loss of totaling ¥50,497 million on Brightstar's goodwill, intangible assets, and property, plant and equipment as their recoverable amounts fell below their carrying amounts as a result of revision of Brightstar's business plan.
Further, in some cases, investments concentrate on multiple companies in a particular market, leading to a high concentration of investments in the said market. For example, in recent years, Delta Fund and an SBG subsidiary have invested in Xiaoju Kuaizhi Inc. (DiDi). Delta Fund investments do not reflect SBG balance sheet investments. SBG subsidiaries have invested in several companies that provide ride-sharing services in various countries and regions overseas, including Uber Technologies, Inc., GRAB HOLDINGS INC., and ANI Technologies Private Limited (Ola). In such markets, deterioration in market conditions due to sluggish demand or intensified market competition (including competition among investees) could reduce the profitability of investees and result in the Group being unable to develop businesses as it had expected at the time of investment, which could impact the Group's results of operations and financial position.
In addition, an investee may be facing internal control problems or conducting unlawful activities. If such issues cannot be corrected at an early stage after the investment, the Group's credibility and corporate image may be impaired, and there could be an impact on the Group's results of operations and financial position.
Moreover, if the Group is unable to secure sufficient human resources and other management resources for the start-up of new businesses and other projects, or if the Group is unable to allocate sufficient management resources to the investees or the Group's existing businesses, or if the number of employees increases due to company acquisitions or other measures and these employees are unable to adapt to the present organizational structure or corporate culture, it could impact the Group's results of operations and business development. In addition, an unsuccessful merger of an investee business and an existing business could lead to a lowering of customer satisfaction levels or the loss of important employees, which, as a consequence, could prevent the achievement of expected results.
(14) SoftBank Vision Fund and Delta Fund
SoftBank Vision Fund and Delta Fund are both managed by SBG's wholly owned subsidiary in the UK, SB Investment Advisers (UK) Limited (“SBIA”), which is regulated by the UK Financial Conduct Authority. Investment decisions of the funds are made by the respective Investment Committees of SoftBank Vision Fund and Delta Fund, which are established as committees of SBIA. SBG (directly or indirectly) invests in both funds in its capacity as limited partner.
SoftBank Vision Fund completed its first major closing in May 2017 and started its operations thereafter. SoftBank Vision Fund has invested in companies across a wide range of technology sectors. In principle, its investment period is up to 5 years from the final closing with a minimum fund life of up to 12 years from the final closing. Investments of USD 100 million or more that are in accordance with the investment strategy of SoftBank Vision Fund are required to be carried out through SoftBank Vision Fund although there are certain exceptions under which SBG may carry out the investments. Such exceptions include (but are not limited to) (ⅰ) investments not meeting the USD 100 million threshold, (ⅱ) strategic investments by an SBG operating subsidiary, and (ⅲ) other investments that are not in accordance with SoftBank Vision Fund's investment strategy or criteria. As of March 31, 2018, total committed capital for SoftBank Vision Fund was USD 91.7 billion,*1 including total committed capital from SBG of USD 28.1 billion.
Delta Fund has invested in Xiaoju Kuaizhi Inc. (DiDi), an operator of ride-sharing service in China. Delta Fund has an investment period of up to 5 years from the final closing of SoftBank Vision Fund with a minimum fund life of up to 12 years from the final closing of SoftBank Vision Fund. As of March 31, 2018, total committed capital for Delta Fund was USD 6.0 billion,*1 including total committed capital from SBG of USD 4.4 billion.
In the event that SoftBank Vision Fund and Delta Fund are not able to realize returns on their investments as expected, SBIA could be paid less performance fees, which are paid when the performance of SoftBank Vision Fund and Delta Fund reach or exceed certain levels (in accordance with the waterfall structure in the fund documentation of each of SoftBank Vision Fund and Delta Fund). Moreover, the Group may not be able to realize returns as expected on investments it made as a limited partner in SoftBank Vision Fund and Delta Fund.
All entities that comprise SoftBank Vision Fund and Delta Fund are consolidated by SBG. Of the portfolio companies of SoftBank Vision Fund and Delta Fund, those SBG is deemed to control from an IFRS perspective are treated as SBG's subsidiaries, and their results of operations, assets, and liabilities are included in the consolidated financial statements, and could therefore negatively impact the Group's results of operations and financial position. Investments made by SoftBank Vision Fund and Delta Fund in entities other than SBG's subsidiaries, including investments in SBG's associates, and investments made by SBG or its subsidiaries based on the premise of transferring to SoftBank Vision Fund or Delta Fund in the future, dependent on requisite contractual consents, are measured at fair value at the end of each quarter, and changes in the value are recognized as a net profit or loss. A decline in the fair value of these investments could have a negative impact on the Group's results of operations and financial position.
In addition, any decline in the value of SoftBank Vision Fund or Delta Fund following a drop in the value of the investment equity acquired by SoftBank Vision Fund or Delta Fund could cause SBG to recognize a valuation loss on either of the funds, which could have a significant impact on SBG's results of operations and distributable amount in non-consolidated financial statements.
(15) Support for subsidiaries and others
The Group occasionally provides subsidiaries and others with financial assistance through loans, guarantees, and other means, when it deems such assistance to be necessary. For example, if Sprint and Brightstar are unable to conduct business as anticipated at the time of the acquisition, or are unable to create sufficient synergies with other subsidiaries and associates, or require more funds than anticipated to develop their businesses, the Group may provide them with financial assistance such as loans. If the supported subsidiaries and others are unable to conduct business as the Group expects, it could impact the Group's results of operations and financial position.
(16) Country risk
The Group conducts business and investment overseas in the U.S., China, India, Europe and Central and South American countries, and other countries and regions. The enactment of or revisions to the laws or regulations of these countries or regions that differ from those of Japan, or a change in their enforcement as practiced by prior or existing administrations, or the Group's entry into a country or region with respect to which the Group has insufficient knowledge or experience to conduct business activities could prevent the Group from conducting business activities as anticipated, or delay or prevent the recovery of its investments, or have other effects with a consequent impact on the Group's results of operations and financial position. In addition, enactment of or revision to laws or various regulations or changes in their implementation by administrations in such countries or regions could also restrict the Group from engaging in new businesses or investments or prevent the Group from carrying out strategies as anticipated.
Moreover, the occurrence of political, social, or economic turbulence in such countries and regions, due to the outbreak of wars, conflicts, and terror attacks, the enactment of economic sanctions, the outbreak of communicable diseases, and other events, could prevent the Group from carrying out its business activities as anticipated, or delay or prevent the recovery of its investments.
(17) Laws, regulations, systems
The Group conducts its business and investments under laws, regulations, systems, and so forth in various fields in each country, and is affected by these both directly and indirectly. Specifically, these range from laws, regulations, systems, and so forth pertaining to the telecommunications business (including but not limited to the Telecommunications Business Act and Radio Act in Japan, and similar corresponding laws in the U.S.) to various laws, regulations, systems, and so forth pertaining to businesses such as Internet advertising, e-commerce, energy, artificial intelligence, robotics, finance and settlement services, and other general corporate business activities (including but not limited to laws, regulations, systems, and so forth related to the environment, product liability, fair competition, consumer protection, protection of personal information and privacy, anti-bribery, labor affairs, intellectual property, prevention of money laundering, taxation, foreign exchange, business and investment permits, and import and export activities).
If the Group (including officers and employees) conducts activities in breach of those laws, regulations, systems, and so forth the Group may be subject to sanctions or guidance by government agencies (including but not limited to deregistration, revocation of licenses and fines), or may face cancellation of business agreements by business partners, regardless of whether the violation was deliberate or not. As a result, the Group's credibility and corporate image may be impaired, or its business development may be hindered. In addition, the Group may incur a financial burden and it could impact the Group's results of operations. Furthermore, revisions to such laws, regulations, systems, and so forth or the enforcement of new laws, regulations, systems, and so forth or new interpretations and applications of laws, regulations, systems and so forth (including amendments thereof) could create a hindrance to the Group's business development or incur or increase a financial burden on the Group. This could impact the Group's results of operations.
For example, in recent years the Group invested in many companies that provide ride-sharing services in various countries or regions overseas, including Uber Technologies, Inc., Xiaoju Kuaizhi Inc. (DiDi), GRAB HOLDINGS INC., and ANI Technologies Private Limited (Ola). The taxi industry and ride-sharing service industry are subject to important regulations. Therefore, each company must comply with the relevant laws and regulations in the countries and regions where it provides services. In countries where compliance with the relevant laws and regulations is judged to be operationally impossible or difficult, discontinuation of or changes to the services provided could prevent the development of existing or new businesses as expected.
Further, sometimes the Group's investment activities (including corporate mergers and acquisitions) require the approval of the regulatory authorities of the countries involved. Being unable to acquire these necessary approvals could prevent the Group from proceeding with its business activities as expected or render business activities impossible.
In addition, on April 29, 2018, Sprint and T-Mobile US, Inc. entered into a definitive agreement to merge in an all-stock transaction. For details about the main risks associated with this agreement, see “(25) Merger of Sprint and T-Mobile US, Inc.”.
(18) Changes in accounting and taxation systems
The introduction of new accounting or taxation systems, or changes to existing systems, and the occurrence of an additional tax burden due to differences of views with the tax authorities could impact the Group's results of operations and its financial position.
(19) Measures to protect U.S. national security
In relation to certain investments in the U.S., SBG and the companies receiving these investments (investees) have entered into a National Security Agreement with the relevant departments of the U.S. government. Under the National Security Agreement, SBG and the investees have agreed to implement certain measures to protect U.S. national security. Implementing these measures could increase costs and limit control over certain U.S. facilities, contracts, personnel, vendor selection, and business operations. This could impact the Group's results of operations.
(20) Regulations about health risks associated with electromagnetic waves
There have been some research results that have indicated the possibility that electromagnetic waves emitted from mobile devices and base stations have adverse health effects, such as increasing the risk of cancer. The International Commission on Non-Ionizing Radiation Protection (ICNIRP) has prescribed guidelines relating to the amplitudes of these electromagnetic waves. The World Health Organization (WHO) has issued an opinion that there is no convincing evidence that electromagnetic waves have adverse effects on health when their amplitude is within the reference values in the ICNIRP's guidelines, and recommends that all countries adopt them.
The Group complies with a policy for protection from electromagnetic waves based on the ICNIRP guidelines in Japan, and complies with the requirements of the Federal Communications Commission (FCC) in the U.S. However, the WHO and other organizations continue to conduct research and investigations, the results of which may lead to regulations being revised in the future, or new regulations being introduced. Complying with such revision or introduction of regulations may incur costs, or may restrict the Group's business operations, which could impact the Group's results of operations.
Moreover, regardless of the presence of such regulations, concerns over the adverse effects on health associated with use of mobile devices could make it difficult for the Group to acquire and retain customers, which could impact the Group's results of operations.
(21) Intellectual property
If the Group were to unintentionally infringe on intellectual property rights held by a third party, it may be prevented from using the intellectual property or subjected to claims for compensatory damages or license fees from the third party. Such actions could impact the Group's results of operations. Corporations and persons who have acquired usage rights for Arm's technology (licensees) could become subject to such claims, and Arm could be obliged to provide compensation to licensees based on license agreements.
On the other hand, if intellectual property held by the Group, such as the SoftBank brand or the Sprint brand, were infringed upon by a third party, such an infringement might have a negative impact on the Group's credibility or on its reputation.
The Group faces the possibility of lawsuits by third parties claiming compensatory damages for the alleged infringement of rights or benefits. These third parties may include customers, business partners, shareholders (including shareholders of subsidiaries, affiliates, and investees), and employees. Such lawsuits could hinder the Group's business development or may impair the Group's corporate image, as well as create a financial burden that could impact the Group's results of operations.
(23) Administrative sanctions and other orders
The Group may be subject to administrative sanctions and guidance by government agencies. Such administrative actions may hinder the Group's business development and may create a financial burden that could impact the Group's results of operations.
(24) Preparation for listing of SoftBank Corp.
In February 2018, SBG and SoftBank Corp. jointly announced their commencement of preparations to list SoftBank Corp. shares. Preparations for the listing will be conducted on the premise that SoftBank Corp. will continue to be a major consolidated subsidiary within SBG's telecommunications business after listing. While the sale of the company's shares at the listing is expected to generate proceeds, the listing of SoftBank Corp. that generates stable cash flow as a major consolidated subsidiary could affect the Group's cash flow depending on SBG's equity interest in the company and the company's dividend policy, and eventually affect the creditworthiness of SBG.
However, there has been no decision on which exchange, including the Tokyo Stock Exchange, to list the shares of SoftBank Corp. There is also a possibility that a decision not to list SoftBank Corp. shares could be made following reviews and studies conducted during the preparation process.
(25) Merger of Sprint and T-Mobile US, Inc.
On April 29, 2018, Sprint and T-Mobile US, Inc. entered into a definitive agreement to merge in an all-stock transaction (the “Transaction” herein (25)) at a fixed exchange ratio of 0.10256 T-Mobile US, Inc. shares for each Sprint share (or the equivalent of 9.75 Sprint shares for each T-Mobile US, Inc. share). Upon completion of the Transaction, SBG will own approximately 27.4%*2 of the combined company (the “NewCo”); the NewCo is expected to become an equity method associate of SBG; and Sprint will no longer be a subsidiary of SBG.
The Transaction is subject to Sprint and T-Mobile US, Inc. stockholder approval, regulatory approvals, and other customary closing conditions. The Transaction is expected to close no later than the first half of 2019. However, being unable to close the Transaction due to issues related to the acquisition of approvals from the relevant regulatory authorities or related to other conditions or schedules, which have been estimated based on a variety of factors, or being unable to close the Transaction itself could prevent the Group from proceeding with its business activities as expected or render business activities impossible or could adversely affect Sprint's existing businesses. Such contingencies could adversely impact the Group's results of operations.
Upon completion of this Transaction, SBG will acquire the shares of the NewCo and recognize its fair value at the completion as the acquisition cost. If the acquisition cost falls below the carrying amount of Sprint on consolidated base at the completion of the Transaction, there is a possibility that a loss will occur, which could adversely affect the Group's results of operations and financial position.
Furthermore, a lowering of customer satisfaction levels or the loss of important senior management team members, employees, or business partners due to an unsuccessful integration of businesses after a merger based on the Transaction, which could be caused by a variety of factors; or being unable to achieve or generate sufficient synergies, such as cost reduction benefits, after the integration of businesses; or the failure of the Transaction to produce the expected benefits could adversely impact the Group's results of operations.
A proportion of the capital commitment from limited partners other than SBG (the “Third-party Investor”) in both SoftBank Vision Fund and Delta Fund has been committed in consideration of the total capital committed for both separate funds; hence, the total committed capital and remaining committed capital for each separate fund will change according to the status of contribution by the Third-party Investor in each fund.
This is an estimate based on fully diluted shares inclusive of the exercise of SBG's existing warrants to acquire shares of Sprint. Figures represent shares beneficially owned.
Abbreviations used in this page, except as otherwise stated or interpreted differently in the context, are as follows. Each of the following abbreviations indicates the respective company, and its subsidiaries if any.
Abbreviation Definition Sprint Sprint Corporation Brightstar Brightstar Global Group Inc. Arm Arm Limited SoftBank Vision Fund
SoftBank Vision Fund L.P.
SoftBank Vision Fund (AIV M1) L.P.
SoftBank Vision Fund (AIV M2) L.P.
SoftBank Vision Fund (AIV S1) L.P.
Delta Fund SB Delta Fund (Jersey) L.P.