• Investors raise concerns over ‘money-losing startups’ that litter SoftBank’s portfolio.
  • Vision Fund II, DT’s partner in at least three investments, remains a priority.

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DT partner SoftBank hit by perfect storm

Source: Unsplash / Breno Machado

Deutsche Telekom’s strategic relationship with partner SoftBank may have lost some of its gloss after the Japan-based group’s share price and ability to secure finance were hit by investor fears over the value of its various technology investments.

A Reuters report said the value of marquee portfolio companies have tumbled, with Alibaba and Didi Global dropping 35% and 64%, respectively, in the year-to-date.

DT may have been watching with some horror as SoftBank’s bond yields rose and share price tumbled, and the cost of credit default swaps reached a two-year high, according to Reuters.

DT signed an expanded tie-up with SoftBank mid-2021, which led to the opening of some new strategic horizons, including “investment collaboration” between the pair (Deutsche Telekomwatch, #107).

At the time, the move boosted SoftBank’s share price to a nine-month high, Bloomberg reported, and saw the group secure 4.5% of DT and about 3.3% of T-Mobile US. The US NatCo said SoftBank’s stake stood at 4.9% by the end of 2021. Notably, SoftBank said it would be able to use DT and TMUS shares as collateral for “financing and hedging purposes”.

The DT partner’s woes were attributed to various factors, including China’s tech crackdown, Russia’s invasion of Ukraine, and inflation.

The Reuters report said SoftBank Group Chief Executive Masayoshi Son indicated last month that “we will definitely be selling a good chunk of assets” after the collapse of the planned sale of chipmaker Arm to Nvidia.

However, the news agency noted that investors were “turning sceptical” on “money-losing startups”, and expressing concerns about SoftBank’s ability to “monetise holdings in any significant manner”.

Vision ahead

SoftBank is nevertheless said to be prioritising investment through Vision Fund II, which, along with DT, recently invested in ed-tech platform provider GoStudent.

Marcelo Claure, then-CEO of SoftBank Group International, said last year that the two partners were ready to “immediately” partner on three Vision Fund II investments, including GoStudent as well as Fintech player Revolut and e-scooter vendor TIER Mobility. All three investments are currently listed in the Vision Fund portfolio.

In February, Reuters said the fund had taken stakes in more than 200 companies. DT and SoftBank also both participated in a $50m funding round for disruptive IoT startup 1NCE in September 2021.