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9 May 2019

SoftBank mulls stake in RJio and Vision Fund IPO; partners with Loon

Japan’s SoftBank continues to expand its reach into all kinds of next generation technology and connectivity via its $100bn Vision Fund, and is now considering an initial public offering for the division, according to reports in the Wall Street Journal.

Although the fund has increasingly taken its parent further away from telecoms and into technologies like artificial intelligence and robotics, SoftBank is still interested in extending its MNO model too. It already owns Sprint (though may be on the point of offloading it to T-Mobile USA), and now it is reportedly conducting due diligence on a possible $3bn investment in Reliance Jio, the disruptive Indian new entrant which is now third-placed in that country’s mobile market.

This would help RJio’s chairman Mukesh Ambani to raise funds for its own expansion, according to reports in India’s media.

Meanwhile, the Vision Fund may also be looking for new investment. The fund was set up in 2017 and has become one of the world’s biggest sources of venture funding for technology companies in the world. High profile companies which SoftBank and/or Vision Fund support or own include processor IP giant ARM, Brightstart, Boston Dynamics and WeWork.

Most of the fund’s money has come from investors in Saudi Arabia and Abu Dhabi, and now it is in talks with another Gulf state, Oman, to boost the coffers, according to reports.

Both the Oman talks and potential IPO are to help the Vision Fund double its staff to keep up with the frantic pace of deal-making, set by SoftBank chairman Masayoshi Son. The new funds would also support “informal deals” which Son has been negotiating in China, sources told the WSJ, and could lay the foundations for a second investment fund, something SoftBank has said publicly it plans to establish in time.

SoftBank also invests in emerging technologies through other vehicles. For instance, last month its HAPSMobile wing took a $125m stake in Loon, the Alphabet rural Internet subsidiary based on tethered balloons or stratellites.

The deal also brought the Japanese firm a valuable partner for its high altitude network connectivity projects. This will come in especially useful for HAPSMobile’s new HAWK30, an unmanned aircraft system (UAS) that SoftBank hopes can serve as a way to bring cellular coverage to challenging terrestrial locations.

While LPWAN vendors, of both the licensed and unlicensed variety, are targeting these same remote locations, with the U-LPWAN community showing more enthusiasm than the MNOs, they should be bracing for a wave of IoT-focused nanosatellite competitors. These start-ups are looking to launch cheap satellite constellations, embracing the plummeting launch costs brought about by SpaceX’s industry shake-up.

In between these two camps, stratospherically speaking, lie the likes of Loon, which is now a standalone subsidiary of Google parent Alphabet rather than an internally incubated project.

For conventional LTE connectivity, Loon has already proved its capabilities, especially in disaster relief applications, and indeed, despite early scepticism, Loon’s approach has outlasted Facebook’s interest or optimism.

Facebook was planning on using a UAS that was pretty much a solar-powered pilotless plane – one giant V-shaped wing covered in solar panels that could act as a platform for mobile networking equipment, designed to remain aloft for weeks. Facebook sunk a lot of money into this venture, buying and then shuttering Aquila.

Undeterred, HAPSMobile is planning on launching its own version, the HAWK30. HAPSMobile is a joint venture between SoftBank and AeroVironment, a US start-up. The UAS will fly at a 20km height, on its 78-meter wing using 10 propellers, and is intended to serve areas that lack good coverage, such as mountainous regions, island communities, and developing countries. As well as conventional cellular devices, HAPSMobile cites IoT and 5G as focus areas.

Loon has netted $125m from HAPSMobile, and has the option of investing the same into its new partner. The two units say that they are actively exploring commercial collaborations to accelerate the deployment of high altitude networks, “with a focus on expanding mobile Internet penetration, enabling Internet of things (IoT) applications, and assisting in the deployment of 5G”.

As for more concrete details, the pair say that they are now in formal negotiations on a number of elements. Most interesting is a wholesale agreement which would let them make use of each other’s vehicles, as well as a development agreement for a new jointly developed communications payload device that could be mounted to different types of vehicles – to cater for different regional RF regulations.

Further, a common gateway and ground station design to ease deployments is also on the cards, as is using Loon’s self-organizing network technologies (which coordinate how messages are passed between balloons as they take different positions in the constellation, using different wind currents to control their location). Collectively, this could create a completely shared network that the two can use, but it is far from clear when the overlapping commercial interests would get the better of either party.

It might be the start of a beautiful friendship, but it does seem that HAPSMobile is getting the better deal – access to a proven system that can be scaled quite affordably, in order to provide it with potential global reach.

Junichi Miyakawa, representative director and CTO of SoftBank, and also CEO of HAPSMobile, said: “Building a telecommunications network in the stratosphere, which has not been utilized by humankind so far, is uncharted territory and a major challenge for SoftBank. Working with Loon, I’m confident we can accelerate the path toward the realization of utilizing the stratosphere for global networks by pooling our technologies, insights and experience. Even in this current era of coming 5G services, we cannot ignore the reality that roughly half of the world’s population is without Internet access. Through HAPS, we aim to eliminate the digital divide and provide people around the world with the innovative network services that they need.”