SoftBank Group Corp. (9984) Earnings Call Transcript & Summary

Thank you very much for waiting, ladies and gentlemen. Now we would like to start the SoftBank Group Corp. earnings results announcement for the fiscal year ended March 31, 2020. In consideration of measures to prevent the spread of the new coronavirus, we will conduct our earnings call via Internet. First of all, I would like to introduce today's participants. On the front left, we have Masayoshi Son, Chairman and CEO; Yoshimitsu Goto, Senior Vice President and CFO; Kazuko Kimiwada, Senior Vice President and Head of Accounting Unit. Now I would like to invite Mr. Son, Chairman and CEO, to present you the earnings results and business overview.

My name is Son. So recently, it's been tough worldwide. And every day, there are many sad news here and there. And looking all those, I've been thinking about my own life and looking back my own life, and I believe many of you are sharing the same feelings. So now let me go into my presentation. Back in 1929, Great Depression was there. But then, Dow Jones Industrial average went 1/10. It was a big Great Depression. This Dow Jones Industrial average took 25 years to recover. It was a big damage to -- around the world. And this time, novel coronavirus, I will say, it may damage similar impact to worldwide. Cumulative confirmed cases in global, 4.5 million people. Impact to travel was about 90% decrease. Automotive industry shipments went down by 50%. Impact to restaurant was about 80%. Workforce -- about 80% of worldwide work force has been impacted due to this coronavirus. So I would say this is unprecedented crisis that we are experiencing. Under such a circumstance, we, SoftBank Group, has been receiving several impact in many ways. Consolidated results has already been announced as forecast for our consolidated result a few weeks ago, so I believe there is not much big surprise for you. And as a flash news basis, that we are -- our consolidated result is, as you can see on the slide, net sales, EBIT, net income has been impacted largely. First of all, net sales as you can see from the slide, not much big impact, but EBIT. On the green bar, this is our telecom business, especially domestic telecom business, it's been constantly growing. However, when you look at blue portion, blue bar, which is SoftBank Vision Fund segment has been decreased largely and dragged the EBITDA overall result, and that applies to our net income result as well. So what happened to SoftBank Vision Fund? SoftBank Vision Fund 1, we have invested over 88 companies so far, and the cumulative investment is about JPY 1.4 trillion, valuation gain -- realized gain plus valuation gain. So dark blue is the realized gain, and valuation gain is indicated in light blue. In total, valuation loss is about JPY 1.5 trillion. So our 26 companies was a gain, and 27 companies are marked down -- 47 companies are marked down, excuse me. And last year, this was a big positive, about JPY 2 trillion in total EBIT was recorded. So compared to that, this year, this time is the big loss. On the other hand, cumulative investment in Vision Fund, of which valuation gain and valuation loss-wise. Actually, about JPY 100 billion valuation loss is the number that we are recording, which is the cumulative investment balance. Moreover, cumulative investment was JPY 8.8 trillion and about JPY 0.1 trillion or JPY 100 billion investment loss was made. And this investment is not only from the fund from SoftBank Group, but also we have partners who also invested in SoftBank Vision Fund. Great portion is our other partner, so called LP, or Limited Partners preferred equity, which is 7% fixed distribution is made. In blue, are the performance-based distribution, which is equity. SoftBank is investing in dark blue portion amongst the equity, and that's the direct investment from Softbank Group in SoftBank Vision Fund. Light blue and gray portion is from our partners for this Vision Fund. That is the total picture of the structure or commitment. And the total Vision Fund performance-wise for preferred, we have 7% fixed distribution. And for common equity -- connectivity, excuse me, is minus 7%. And blended IRR is minus 1%. This is the fund -- entire fund performance. For SoftBank Group, of which, as I mentioned in the previous page, the dark blue portion, which is the equity portion only. So for SoftBank Group IRR, including managers performance fee, negative 6%. That is the performance or overall SoftBank Vision Fund. And amongst the investee of SoftBank Group, there are 8 companies who went public. And the performance of those 8 companies are on next slide. The Column A is the investment cost and Column B is the gross return to Vision Fund. And on right -- on the second from the right is the gain -- gross gain or loss to Vision Fund 1. So those 8 listed companies, performance-wise, about JPY 150 billion positive. As of today, this will be a bit better number. But as of the March number, JPY 150 billion is the gain that we are recording. That's for SoftBank Vision Fund. And for the other assets of our holdings that I would like to also cover, Alibaba. This is the biggest holdings amongst all the holdings of assets as of today. If you look at the share price of Alibaba, since this year, especially China has start receiving the impact from new coronavirus, but you can tell from this share price, although that they have dropped once, but actually they hit the bottom and the increasing trend. As of today, actually, domestic in China has been seeing the increase in shipments of Alibaba and the business performance is becoming back to normal. On domestic telecom business, 4% increase in revenue, 11% increase in operating income, the biggest ever. Free cash flow -- adjusted free cash flow, 2% increase. On top of that, we have completed the merger. As of April 1, 2020, that Sprint merged with T-Mobile. If we wouldn't been able to close this merger under the coronavirus circumstance, it may be the big impact to our business overall. So I believe it could be a big problem for us. But fortunately, that we were able to close this transaction as of April 1, 2020. As a result, against the new T-Mobile U.S., SoftBank Group has 24% of equity. That's the ownership ratio. After the merger, stock price has been performing pretty well, and we are expecting a lot of synergies from this merger. Another important asset for us is Arm. Arm-based chip shipment, as you can see, has been growing exponentially. And right after we acquired arm, we have been investing in increasing numbers of employees -- actually, engineers. We were committed to hiring more engineers as a part of our strategy, but our revenue will not double earlier than hiring engineers. So in the meantime, this cost could have impact on cash flow, but we believe that this is going to be helpful for Arm to grow further. In fact, in Mobile sector, Arm has been received pretty well. But after we acquired Arm, as you can see, smartphone market has been growing, which is, of course, helpful for Arm. But on top of that, cloud and data center sector, more and more companies have adopted Arm-based chip. In fact, in the space of cloud, Amazon's AWS is the global #1. And AWS has been utilizing Arm chip more and more. Consequently, processing gets 65% faster and also it helped to reduce or save costs by 40%. So going forward, Arm chip is going to be used more and more by Amazon. In fact, Amazon announced that already, not only Amazon's AWS, but Microsoft Azure, VMware, and NVIDIA. More and more companies -- global companies have adopted Arm-based chip for their cloud servers, and that's a global trend. So the growth of Arm, I have confidence. We talked about Alibaba, SoftBank KK, Sprint, and Arm and Vision Fund. Those are 5 key assets for us. And I covered high level of those asset status. So all in all, we have shareholder value. As of end of December 2019, we have JPY 29 trillion of equity value of holding and we have net debt of JPY 6 trillion. So from shareholders' perspective, shareholder value was JPY 23 trillion. That was in December 2019. And more recently, as of May 18 this year, equity value of holding went down by JPY 500 billion and the net debt increased by JPY 800 billion. And why it increased? Because in the past 3, 4 months, we repurchased our own stocks and also we invested in SoftBank Vision Fund. And also, we announced financing, and financing cost was incurred. So total was about JPY 800 billion. That's why net debt increased by JPY 800 billion since December. So consequently, shareholder value went down by JPY 1.4 trillion since December. However, it was not like a 30% decline, excuse me, or something like that. Whenever we talk about earning results and we have a lot of pages in our presentation, I think this is the most important slide. And other slides are just supplementary from -- as far as I am concerned. So long as you take a look at this particular page deeply, you will realize where we stand, both sales, EBIT and net income. Those are metrics from accounting prospective, but I believe that the fact of the matter is, which is very important, is shareholder value decreased. Equity value holding went down and net debt went up. Because of that, shareholder value decreased by JPY 1.4 trillion. That's the fact. So this decrease is significant challenge, obviously. New York Stock Exchange and Nikkei went down in March dramatically. And like I said earlier, at the Great Depression, share price sharply decreased to 1/10 of pre-Great Depression. And SoftBank are into [indiscernible]. We saw our value decreased to 100. So compared to that dramatic decrease, of course, we have seen decline in our shareholder value, but it was not as shocking as what we saw in some other occasions before. Maybe it sound like an excuse, but challenge remains a challenge for us against very trying background and coronavirus outbreak. We announced JPY 4.5 trillion of selling or monetizing assets. And by getting JPY 4.5 trillion, we will repurchase of our own shares up to JPY 2.5 trillion. For the first tranche, JPY 500 billion. In the past few months, we have been acquiring back our shares in the market. And this morning, we have among -- out of JPY 2.5 trillion, in addition to JPY 500 billion that the first buyback program, next JPY 500 billion buyback program has announced this morning today. So this is out of JPY 2.5 trillion, which has been resolved at the Board meeting recently. So that being announced this morning, Tokyo time. Board meeting was held last Friday night. As a timely disclosure, the morning of Monday, which is today that we have disclosed this information of resolution. And the source for that is from financing using Alibaba share, including Ford contract, floor contract and collar contract. So those are the 3 types of financing scheme that we will be raising JPY 1.25 trillion. And using such fund, we would like to use those proceeds for buybacks and so on, and also based on other ways of asset disposals and funding that we would like to do our buybacks and so on. In loan-to-value, that we are focusing as an important KPI from finance point of view. And on the normal cost, that we would like to keep manage loan-to-value less than 25%. That is our internal discipline, internal finance policy. And in abnormal case, 35% in normal case, managing less than 25%. That is our internal disciplines for our activities. And then such circumstance with coronavirus and so on, we rather like to forecast even more safety management. So last time at the earnings, I believe that was 16%. And as of today, this is 14%. So I believe that we are heading even safe for management of the business. In dividend, we would like to be also managed safely fiscal '19. Interim dividend, JPY 22; year-end dividend, JPY 22; and annual dividend, JPY 44 in total, which has already been announced, and we will exactly do as we announce. But for fiscal 2020, due to the current economic crisis, as for dividend, note that we would like to fix the amount. But in case need -- we need further money or so that we would like to keep this as -- to be decided. To be decided, meaning that there could be a case of no dividend as well. We don't consider -- we don't think of increasing dividend, but most probably between 0 dividend to the current level of dividend is somewhere that we are looking into at this moment. As an option for the management, we would like to keep the flex rooms there so that we'll be able to choose the option based on the circumstance. And the -- for fiscal 2020, this fiscal year, both interim dividend and year-end dividend, we would like to keep our options available at this moment, which is the first thing ever since the foundation of business, but we would like to keep those dividend amount to TBD at this moment. So novel coronavirus has been spreading around the world and also causing huge crisis to the human kinds. As SoftBank Group, as part of the social contribution or contribution to the society, that we've been supplying at cost to medical sales for such devices, including test kits, masks, goggles, face shields, protective suits and so on. So there are many medical staffs or people having difficulty getting those tests kits or the suits or masks. And I've been hearing that there are some people who are wearing just a raincoat instead of protective suits because there is shortage of such suits. And also, masks are very short in those medical facilities that they at least wanted to change or replace their masks once a day. But because of shortage of the mask, they have to use for 3 days, 4 days and so on. It's not the issue of money, it's issue of just the procurement of those kits and those equipments. And I heard that in taking advantage of my network friends and so on around the world. I asked for their help. And as a result, that they were able to procure those equipments, although that we are hitting the biggest loss ever since the foundation. Therefore, that we wouldn't be able to make a free-of-charge for everyone. Of course, for the antibody test kits that we will be supplying this free of charge. But others, that we will be no profit for other equipments, just as for the cost and distribute such equipments to those concerned parties. So having such a contribution to the society, but also, the most important thing for us is to contribute to the society through our core business, which is to create a new world with information revolution and happiness for everyone. That's the -- our corporate philosophy, which we would like to satisfy in those unicorns, who can make that happen. And support those entrepreneurs and businesses is my role. And those unicorns has been also facing big difficulties under such circumstance. For them, new customers, new clients, they've been already serving their services or acquiring the customers with negative profit and so on. But because of the coronavirus situation, they've been seeing a big drop in sales, like I mentioned, the travel business has been impacted by 90%. Of course, worldwide between countries, transportation, business trip, travel has been prohibited because of country policy in many countries right now. So that their sales, of course, has been dropped because of that, and that been impacting to many of the unicorns around the world. On top of that, they do need money. But cash management wise, that why is that they've been having a difficult time and experiencing negative free cash flow and so on. When you put it into picture, so they've been writing up the steep road. And originally speaking, they were able to keep going. But because of the value of coronavirus all of a sudden happened, and unicorns been dropping into such valley. And this is a big crisis for many of us. But even under such circumstance, some of them been able to jump up the valley and flying up with their wings to catch up with their momentum, and they could even fly higher when they face the difficulties, and there are such unicorns out there as well. Back in 1929, in the 25 years, well, necessary to recover the Great Depression. And that was one example from the stock exchange and so on. After the Great Depression, when the economy came back, whether the same industries got recovered or not. In fact, the old industries were heavily impacted, and they ended up going bankrupt. And beyond the valley of Great Depression, industries that came back dramatically were new industries back then, like automobile, home electronics, oil, manufacturing, electricity, food processing. Those new industries, at that time, rebounded. So not traditional industries, but new industries were the ones that rebounded significantly after the Great Depression or the great crisis like the Great Depression. So likewise, we are seeing valley of coronavirus. So new industry or new technologies rather like online meeting, food delivery are the ones to be rebounded, and online education, online medical care, online shopping and video streaming service. Without touching physically, people can touch emotionally online, whether it be medical or in other areas. So for new industry and for new era, I think those technologies will lead the rebound, and that trend will be accelerated, I believe. Our unicorns are facing serious challenges against the background of coronavirus outbreak, but I believe that some of them will fly over the valley of coronavirus and go beyond and fly high. Our philosophy, information revolution, happiness for everyone, that's our consistent vision since the foundation of our company. So we remain committed to this vision, and we're back to the basics, and we will continue working hard. This shock for corona outbreak will accelerate the paradigm shift for a new era, and we are looking forward to navigate through the challenges. Thank you very much.

[Operator Instructions]

My name is [ Hoto ] from Nikkei Newspaper. Can you hear me okay?

Yes.

I have question on Vision Fund. And my first question, so thinking about this fiscal year and the next fiscal year, which is 2020, how do you think about the new investments? And about IPO market, how do you think about it for this year? And you mentioned about fixed distribution of 7%, but I believe that you'll be making a follow-up investment and so on. And source for this fixed distribution can be short, and how are you going to manage that?

Yes. Thank you very much for your question. As for SoftBank Vision Fund 1, which is about JPY 10 trillion and about JPY 8.8 trillion has been used for the investment, which I have mentioned earlier in the slides. Remaining money or remaining funds are saved to make distribution -- fixed distribution of 7%. Therefore, we do have enough source for the distribution. And also, as for follow-on investments, which we will need some fund for that, but that's also included in those savings. So new investments for SoftBank Vision Fund 1 is no longer exist, and the remaining amount or remaining fund will be used for the distribution of fixed coupon and also the follow-on investments. As for new investments, I am thinking, the SoftBank Vision Fund 2, using our own money, and we've been continuously making investments because the performance Vision Fund 1 is not that great. Therefore, we decided not to do the marketing for Vision Fund 2 for the partners for awhile. And in the meantime, we would like to use our own money to do the investments through Vision Fund 2. If the performance is not very good, then, of course, the money for Vision Fund 2 cannot be asked for other people. It's not popular. Vision Fund 2 funds that the people may ask to me, it's not okay. That's the answer from me. Honestly speaking, it's not okay. That's why we've been using our own money to continuously invest. However, having said that, Vision Fund 1, we will be able to -- we may be able to see companies that can boost our performance gradually. So once we see the better performance in Vision Fund 1, then we may be able to have some offer from the people other than us to participate in Vision Fund 2. That's my optimistic view about the future of Vision Fund.

So that -- so new investment is not really frozen, you're continuously investing.

Yes, we've been continuously investing. The new investment does not mean that we have enough money to do so, so that we do learned a lesson from Vision Fund 1. So we became more careful to choose the investees to do the investments.

I have second question. So JPY 4.5 trillion in asset disposal program that I would like to ask you. JPY 1.25 billion financing using Alibaba share, and I believe you've been using some ownership of Alibaba share for this financing. But this forward contract and collar transactions, there are many schemes that you've been using. But can you give us a little bit more color on those transactions?

It can be a bit long to explain one by one for transaction, but this is the very general forward contract. So 4 years later, we settle or something like that so that we effectively sell, but it's going to be settled in 4 years. And we raised money in front -- upfront. That's been the scheme we've been using in the -- before and it's a similar scheme. And also floor contract, this is to raising money and save the upsides to some extent. Collar transactions, this is the 2-year collar transaction. We sell once and raise money, but some will be maintained with us for upside in future. So at the time we invest in NVIDIA, we use the collar transaction scheme, which we disclosed later. And this is a similar scheme that we use for that case. For details, our finance team will be able to answer your questions, but that's the big picture. Thank you very much. For any other question, I believe that the -- I would like to take more as many questions as possible, so can you keep your questions to one. Thank you.

Inoue from Asahi Newspaper. My question is shareholders' value you mentioned. And Vision Fund was supposed to be a growth engine, but our performance was negative. So at this time, do you think that Vision Fund is a failure? And what's your view on future growth?

Well, failure, I assume you want me to say failure. But remember, we invested in JPY 8.8 trillion and that cumulative loss was JPY 100 billion.

Do you want to call it failure or not bad?

It's, I think, up to you. By the way, since December to March end, in the last 3 months, New York Stock Exchange and the Tokyo Stock Exchange dropped significantly. Prominent investors, even them lost like 30% of their holding. 20%, 30% decline since December through today. New York down exchanges and Tokyo exchange. Listed companies lost by 17%, 15%. And Vision Fund invested JPY 8.8 trillion. And JPY 100 billion, just less than 1% of negative. And whether you call it failure or not, I think it's up to your view. As far as I'm concerned, I would say not bad against such very poor market climate.

] My supplementary question. So you mentioned that you continue investment. But you continue -- you will continue investment even against the corona outbreak, for example?

Well, we will continue but not aggressive investment. We will take cautious steps for future investment. Thank you very much.

My name is [ Ika ] from Nikkei Paper. I have one question, please. So you show us the valley of corona, some -- coronavirus, and some of the unicorns went down, some of them fly out. So for those unicorns who are dropping down the valley of coronavirus and who fly away, how -- what are the differences in between those unicorns?

So yes, 88 companies, of which 15 companies could go bankrupt. That's my assumption at this moment. And about 15% can fly away and still make it successful, remaining about 60 unicorns can do, so and so. And later on, like in 5 years, 10 years, if we look back, those 15 unions fly away, fly over the valley can account for about 90% of the total value of our investment. Meaning at the bust of the Internet bubble, Alibaba, Yahoo!, just a few companies account for about 90% of the future value, then for us remaining, some of them went bankrupt, some of them survived, but just about so and so performance. So I would say about the same thing could -- would happen for -- over this time.

[ Hyuuga ] from Bloomberg. I have 2 questions, if I may. Or please keep one?

Make it one, please.

At the press conference on 11th of February, you mentioned that tide was changed. Now you began to see spring after the long winter. And performance back then was pretty good, you said. But hearing what you have said today, you sound very optimistic to the market, to the public. Back then even, we we're beginning to see the sign of coronavirus outbreak, and you mentioned that you didn't stop financing. HAWKS Bond annual amount is about JPY 1 trillion. I wonder if you have a plan for issuing bonds like HAWKS Bond for retail investors.

Yes. 3 months ago, I said, yes, tide was shifted. And that was what I believed, and that was actually happening. So back then, my view was we were about to get rebounded from the bottom, and the impact of this COVID-19, significant impact from the virus back then was not projected by many people, including myself. I was rather optimistic in February, but now, like I mentioned earlier, COVID-19 present significant threat to the humankind. Well, we started seeing some improvement with regards to infection cases. And in Japan, emergency declaration may be lifted, but also, some people say that second wave may come in fall or winter. So we can't just be semi-optimistic. So antibody for medical treatment and vaccine for, obviously, medical treatment should be available for people to start living life more comfortably. We will see when it happens. In regards to bonds for retail investors, it depends on how our performance goes and the needs in the market. We will continue seeing what's going to happen.

My name is [ Masuno ] from Nomura Securities. So how are you going to compete against the investment activities in overseas? Some of the activities are seen by raising some money for new investments. For you, the Vision Fund 1 has already been stopped investing, but how are you going to compete against your competition -- competitors? Those investees that you have already invested by SoftBank Vision Fund 1 and other investees, I believe, that the Arm is something that we have high expectation, and we are also assuming that it's going to grow. But set aside Arm, how are you going to compete in the market?

Yes. Thank you for your question. For Vision Fund 1, amongst the investee out of the SoftBank Vision Fund 1, 8 companies has already been public. And I believe those companies who went public, we are quite sure that we will be able to collect those money that we invest. And we will be able to use those proceeds for investment in Vision Fund 2. That's something that make it available for us, and it's going to be recycling inside of Vision Fund. That's something is going to be available for us. And this time, we have announced the JPY 4.5 trillion program, and we will be receiving such proceeds out of the programs and -- of which the JPY 2.5 trillion for buyback for our own shares. So we would like to exercise -- execute those transactions in order. But the majority of those proceeds can be used for improving our balance sheet, and some will be used for our new investment. Luckily, our positions in the market, we have already been set a good ground to investing in unicorns. So if there is any good opportunity out there, we have a ground to be able to receive such information, based on such information without stretching too much that we would like to consider positively about the new investments as well. Thank you.

[ Hayato ] from Kyoto Press. In the past, you experienced Lehman shock and IT bubble burst. You navigated through those challenges. And the current coronavirus outbreak, how much impact this has from your perspective? I think it's, of course, out of your control. But what's your view compared to the past crisis?

As a business man, I've been leading a long life as a business man. And right after IT bubble was burst, I suffered. And right after that, I started Yahoo! BB, and back then, it was on the verge of a cliff. And in fact, half of my body was leaning over the cliff. Maybe I was holding my body with 2 fingers only. And the Lehman shock, if you will, rather than holding my body with 2 fingers is like holding my body with one arm, trying not to fall off the cliff. This time, even though it's a global crisis, but in 12 months or so, we are expecting monetizing around JPY 4.5 trillion and enhancing our financial position. And using Alibaba shares, we financed JPY 1.2 trillion. When we did that, we were able to execute that without having significant impact on Alibaba's share price. When we try to sell one of our assets, people would say that, "Well, you shouldn't do that because that could have a significant negative impact because the stock price would go down." But we were able to complete execution successfully by using Alibaba shares. And remaining portion, within 2 months or so, we should be able to complete execution. So it's not like holding my body with 2 fingers or one arm. So compared to the past crisis, this time, I am just looking down the bottom of the valley from above.

My name is [ Subaru ] from Wall Street Journal. So you have announced the big buybacks of your own share to the market. And also, you, yourself, is a major shareholder of the company and the majority of your holdings has been used as collateral. Is there any -- is that going to be an issue for you going forward?

From the governance point of view, my own loan, my own borrowings, some hundreds of billions of yen. And the value of the holdings of SoftBank Group for myself, personally, is some trillion yen equivalent, more specifically, about JPY 2-point some trillion assets for my own. And I say I have a borrowing of about JPY 500 billion. So against the assets, it's about 20% is the kind of status. So I wouldn't say that's a big issue or risk from my understanding. Does that answer your question?

So recently, you, yourself and also some co-holders, so about 70% -- up to about 70%, or I would say 67%, are used as collateral. That number has been out there. Is this wrong or what?

Depending on the share price at the time, the haircut for the loan may be different so that sometimes, that we've been having a bigger haircut than the loan itself. But as of today, it's been improved quite largely.

[ Iga ] from NHK. About Sprint or new T-Mobile, you mentioned that you're expecting synergies from the merger. And from asset perspective, asset is for sale going forward. So what's your view on that in the future?

On T-Mobile, after getting merged with the Sprint has been seeing their performance pretty well, and synergies from the merger should be materialized from cost perspective and from spectrum perspective and from customer acquisition perspective. So new T-Mobile's performance and value, our ownership value, I have high expectations from that. But which asset that we have should be used for financing, we are open to different options and scenarios.

Yes. My name is [ Tokita ] from TV Tokyo. I would like to ask you about the valuation of unicorns, for example, WeWork, which being discussed since last year. And Masa, you mentioned that in AI era, online usage is going to be very frequent, but the real office is going to be suffering due to the shortage of demand. So out of the unicorns, you mentioned 15 companies may go bankrupt and 15 is going to go successful and 16 are so-so. So amongst your investment amount, can you elaborate a little bit more?

So yes. So out of 88 companies, the big segment is those ride-sharing business such as the DiDi, Uber and so on. Those are the big portion. And then medical segment is another one, which went public and showing a good performance in same medical companies. But some of them are utilizing AI to explore the new types -- or new business. When it comes to WeWork, OYO, those O2O type of business, off-line/online combined business model is also there amongst our investees. Region-wise, 40% in U.S.; 40% in China; and remains, the other areas. That's the kind of allocation. And at this time, purely online type of business was actually doing better in spite of such circumstance. And when it comes to O2O, online to off-line combined type of business models, especially those shared economy type of business, such off-line portion -- online is okay. But the off-line portion, because they have to close offices, you cannot travel. So there are such aspects due to this coronavirus, and that, of course, becomes difficult to keep up their business. On the other hand, after the end of this coronavirus situation, do you want to have a 20-year lease for office? Maybe that's not the situation anymore after the corona. So it's going to be very uncertain going forward. The Great Depression I mentioned, 25 years were necessary to recover. And this time, again, I believe actual economy is going to be suffering for quite long years in a negative way and currently very uncertain for the future. And some of them are doing good, and some of them have some -- or create some demands for office. But rather than 20 years' contract for lease, may be better to use WeWork for short-term period so that they can use the office in an efficient way. So that's another new demand post-corona. And also for the management of hotel business, some of those small hotels, individual hotels, rather than spending your own money to recover from this current circumstance, rather they would like to join OYO Group and connecting online to take an advantage of the new technology developed by head office and acquire the customers. That may be new needs for those businesses. So right now, it's probably a most difficult time for those companies, but post-corona, I believe there are some opportunities for those business still that can be recovering due to the new demands. And for your reference, in ride-share business, Uber in the United States are still having difficult situations, and Uber itself have has disclosed their performance. But DiDi in China, on the other hand, they -- we had a video chat last Friday. But they said they are seeing recovery of the business using such ride-share services and also seeing the signs of improving their business performance. Therefore, I believe they will be also expanding to other -- hoping it's going to be expanded to the other countries as well.

[ Tsuruo ] from Citigroup Securities. My question is about SoftBank Vision Fund. Downside risk for this term, JPY 900 billion. Loss was incurred in SoftBank Vision Fund and other investment. But Masa mentioned that 15 companies in the portfolio may go bankrupt. So those risky companies, I wonder if you provided for valuation loss for those companies. And in order to avoid additional loss, what kind of measures SoftBank Vision will have to keep further loss from happening?

So currently, foreseeable valuation loss, we look at it very conservatively to have a good view on potential valuation loss. But not us evaluating valuation loss, but we have several outside third parties who do evaluate valuation loss. And also, we have governance in place to check the most appropriate valuation loss. So that's the current status with regards to potential valuation loss. But going forward, nobody knows what will happen, especially when it comes to potential second wave that could be bigger than the first wave. I'm talking about coronavirus. So we can't promise that there will not be additional valuation loss. So again, we will take a very cautious approach in managing our investment. So there is a chance of further downside risk. That's something that we keep always in our mind for safe driving. So that's why SoftBank Group contributes its own money and borrowing, both, we try to reduce. And also, we tried to have JPY 4.5 trillion worth of cash and cash equivalent in hand. So that's why we are working on selling or monetizing our assets. So we will keep a close watch on what and how things go. So I can't guarantee there will be no additional valuation loss. In fact, more than valuation gain, there is more chance of valuation loss than valuation gain. That's my view. Of 88 companies, 15 may go bankrupt, I said. So for those 15 risky companies, in principle, we will not provide our financial support only to rescue them. But they don't have much borrowings. We don't want to cause any trouble to lenders. In fact, those companies don't have a lot of borrowing, like I said. But investment that we have made may lose some of its value, but that valuation loss of the investment we will have made in the past. But from a cash flow perspective, we, in principle, will not provide cash to those fragile companies for rescue.

My name is [ Kotohiro ] from Newspeak. Vision Fund, I would like to ask you about Vision Fund. So IRR, 20%, which is high number, but at the same time, the short period for the investment so that you are betting on winning horse that you mentioned before. But this time -- at the same time, we realized that unicorn is very fragile in the -- under such a circumstance, environment, were vulnerable against those environments.

Yes. So when you look at the 5 to 10-year span, I believe we still see a good possibility there ahead. After the burst of the Internet bubble, it was disastrous. At the financial crisis, it was disastrous again. But still, when we look back, we were able to overcome those difficulties or the disastrous situation. But still, we were able to regain our power. Internet companies still grow after the Internet bubble burst. So this time, investee of SoftBank Vision Fund, I believe it's going to be the same. After we go through this valley of coronavirus, some of them will be able to grow. At least 15 companies will go successful even after -- or overcoming this coronavirus valley. And also 15 companies may go bankrupt, and I'm not going to be -- we don't have any plan to have additional investment in such bankrupting company. And out of JPY 8.8 trillion, those companies that may have a bankruptcy possibility is relatively small size. Those large-size investees are actually surviving and doing steady. Seems like they may have a good chance of going through this valley of coronavirus. Exception is WeWork. WeWork, I already mentioned that we made a failure on investing in WeWork, and I've been admitting that several times. I was foolish. I made a wrong decision. I didn't look at WeWork right. That's my honest feelings about that. Other than those, I believe those major investees are relatively doing good, and I am having a good possibilities of growing. Those go bankrupt is going to be relatively small.

A question again. So IRR, 20%, and also the short investment life, how do you think about that?

That's how you compare. Normal venture capitals are investing in early stage. So for them, compared to them, our investment period is relatively short when you count towards the IPO. And also, the possibilities or chances to go public is higher compared to those venture capital. So if you do the comparison, early-stage companies has even more bigger chances of go bankrupt, and IRR can be -- even in a normal course, venture capitals average 13%. So compared to that, I believe our case is not that bad at all. And you're checking everyday those listed securities, Nikkei Average, New York Dow Jones, 10-some percent has decreased compared to the end of December last year. So compared to that, I believe we are surviving in good way. So that's kind of the reality, I believe. So everything is comparison.

How about IRR, 20%? Is that going to be changed?

I think we'll be able to achieve that. Still, I have a belief in that. At this moment, we have suffered most. However, when you look at 5 to 10 years, at the very last close, I believe -- I'm still in belief that we'll be able to achieve that. But nobody can tell at this moment. We have to wait and see. And at this moment, under the coronavirus situation, we're already suffering in most. So if you ask me whether we'll again achieve IRR 20%, I would say because I am very optimistic, that's for sure. So I need to say that. And maybe I'm too optimistic to say that if I say yes. So -- but that's -- only can tell when you see the results. So until then, you cannot tell. And I may be wrong, too.

[ Saito ] from Nikkan Kogyo Shimbun. Talking about Board candidates and also Jack's retirement. What's your view on that? And 2 independent directors will be added, and the total independent directors will be 4. And from the perspective of reducing investment risk and in order to increase probability of investment success, what's your view from a governance perspective?

Jack Ma, for me, is my friend and comrade in my life, shared our view. In fact, 6 months ago or so, Jack stepped down from CEO position of Alibaba, and Daniel was successor as CEO. And Jack has been not on the frontline of their business. So that was an announcement. And stepping down from SoftBank Group's Board, I believe -- and he said to me actually, was something that he decided on his own. That's sad, but we still keep in contact directly. And right before the COVID-19, we met face-to-face every month to have dinner, to talk about businesses, talk about our lives. And we will remain friends for the rest of our life, I believe. And talking about the governance, we plan to have total 4 independent directors. And I'm Founder of the SoftBank, and in -- oftentimes, I'm seen, perceived as one man, just one person there at the top to lead the business. But the reality is we have a lot of discussions and heated arguments every day in our management team. But we have shareholders and we have creditors. For us to run the business, we are a listed company, so we make sure that our governance is placed, in place. And I will stay vigilant and I will stay serious about how we run the business from a governance perspective.

My name is [ Yamada ] from Toyokasei. Can your hear me okay? So you mentioned about IRR for Vision Fund, and you said that some of them are so-so. The 40s are so-so, and 20s go bankrupt, 20s, go well.

So I would say 15, 15 is going to grow well. 15 may go bankrupt, meaning IRR, I will say, very disastrous in return. Remaining 60 companies, we have fixed distribution of 7%. So for those 60 companies, I believe that we will be on the edge, that we'll be able to pay out this 7% of fixed distribution. So it's not a profit, but we have principal, and also the need to distribute 7% of coupon so that the cost in principal -- so after invest, we need to exit. But as a result of exit, for those 60 companies, may not give us a very good profit. 15, big loss of money. But the remaining 15 can even cover or exceed the return providers. So in overall, about 20% IRR may be able to provided from those unicorns with wings, be able to fly over the valley of coronavirus. So 15 is going to be account for 20% IRR in total investment of Vision Fund. That's the kind of performance we are expecting. And myself, I'm believing in such future. And we will do our best to make that happen. But nobody can tell until we just finished, and nobody can tell until we do that. So either for those who look at the pessimistic way, then the value of the investment by Vision Fund can be JPY 3 trillion out of the sum of the parts graph that we've been calculating. And that can be 0. If you are pessimistic, you will say 0 value for Vision Fund. For those principals that we invested in for Vision Fund, there is no loan, there is no borrowings. So that as a capital, we invested in of JPY 3 trillion, and we -- if you are pessimistic, you value SoftBank Vision Fund as 0, then there will be no further negative from there. But even still, we have Alibaba, which is public securities. We monetize some this time -- or T-Mobile shares. We have SoftBank Corp. shares. Some of those 4 assets actually exceed our market cap itself. So value-wise, sum of the parts has exceeding market cap itself. So if you want to be pessimistic, how much I passionately talk about our Vision Fund properly, simply put, you should just 0 -- you should see 0 value for Visual Fund. Sometimes people may say SoftBank Group is so confusing. You cannot really understand at all. Vision Fund, those disclosed information, because it's a group of the private companies investee, so that it's really difficult to see the information, that makes SoftBank Group so confusing. And if you are looking at the P&L balance sheet, you cannot tell at all. It's too complicated. You'll never be able to understand SoftBank Group. Some of them has been criticizing us as that. But for those people, I want you to be a little bit calmed down. And actually, it's not that complicated. As a matter of fact, we are very simple for Vision Fund. If you want to be pessimistic, why on 2? Count it 0 for Vision Fund for now. Alibaba, this is public security, so you can tell the value and also high liquidity so that you can see some value out of it. SoftBank Corp., domestic telecom business, it's growing steadily. And also, this is again the public securities so that you can see the share price on the market. T-Mobile after merger -- up until the merger with Sprint -- actually, Sprint has been a big borrowings and so on, so that you may be seeing there are some uncertainties for the future of Sprint. However, after the completion of merger between T-Mobile and Sprint, and now we have about 24% of those combined company, and the share price changes every day basis. So the only uncertainty is the value of Arm because this is private securities and relatively large portion. And at the same time, EBITDA, actually decreasing since the acquisition itself. But still, I, myself, believe in the future of technology in Arm. And they are growing. So that the value, some of them -- some of you may think, that in different way. So you may pick whatever you like for numbers. But with this market -- high market share company, for Arm, I believe it's no need to put 0 for Arm value. Actually, maybe you can see the full amount of acquisition cost or you may want to decrease in half, that's up to you. But for Vision Fund, you may have a lot of questions. You may have a lot of skepticism. And because of the valley of corona, how many companies can survive? That's another question. How deeply we discussed, but we'll never be able to tell the future. We cannot be that much as certain. So I believe for the calculations, why don't you just put it in 0 for the accounts for the Vision Fund for those pessimistic? Because Vision Fund value, there is no loan, only the 7% of coupons. You don't have to pay with loan. This is not a loan. So that for Vision Fund, no debt on them. So that our shareholders value, which is about JPY 3 trillion that we invest in SoftBank Vision Fund, if you counted 0, then there is no further negative from there. That's the kind of view that you may be able to use. Me, myself, actually, that it's still growing. It has a good value inside of the SoftBank Vision Fund. But that's my subjective view. For you, why don't you choose your own? And if you are pessimistic, why don't you count it 0? Then there is no further negative from there. That's how I would suggest. So we are very sorry, but we need to end question-and-answer session due to the time constraint. And like I said earlier, this COVID outbreak is something that we should overestimate. That's why we decided our monetization plan. And we also announced stock buyback. And for future investment, we will take cautious steps. And when it comes to managing the investment we have made, we will again take cautious approach. As far as I am concerned, however, I'm not that pessimistic compared to the risk that I suffered from in the past. This time is not that bad. Well, again, in the last earnings call, I mentioned that tide was shifted. And it may have sounded very optimistic. And this time, tide has shifted again and things get probably worsened, but we will keep working hard to survive. Thank you very much for your time and attention today. Thank you.

Thank you very much. This concludes the SoftBank Group Corporation earnings results announcement for the fiscal year ended March 31, 2020. The video footage of this meeting will be distributed on demand on our website. Thank you very much, once again, for joining Softbank Group Corporation earnings results announcement for the fiscal year ended March 31, 2020. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]