Cell Service in Japan Goes Down for Hours, Clouding Year's Biggest IPO

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SoftBank’s Japanese mobile unit faces challenges beyond Thursday’s breakdown, including pressure to slash phone charges.

SoftBank’s Japanese mobile unit faces challenges beyond Thursday’s breakdown, including pressure to slash phone charges.


Photo:

toru hanai/Reuters

TOKYO—

SoftBank Group
Corp.’s


9984 -1.63%

Japanese mobile unit suffered an hourslong nationwide network breakdown Thursday, tarnishing the unit’s planned $23 billion initial public offering later this month.

Television footage showed long lines forming at phone booths during the four-and-a-half hours that the network went down at Japan’s third-largest carrier.

The network failure, which began Thursday afternoon local time and was resolved by the evening, arose because of a software glitch that affected Ericsson telecom equipment world-wide, SoftBank said.

A spokesman for Ericsson, which competes with Huawei Technologies Co. and

Nokia
Corp.


NOK 4.07%

, said the Swedish firm will be working with SoftBank to prevent a recurrence.

Telefonica’s O2 also reported network outages that affected customers in Britain on the same day.

The SoftBank IPO—which is expected to approach the $25 billion record set by Alibaba Group Holding Ltd. in 2014—was fully subscribed on strong demand from Japanese retail investors, including an overallotment of extra shares, a person familiar with the matter said.

SoftBank is aiming for a dividend yield of nearly 5%, based on the net profit at the mobile unit last fiscal year. That is an alluring offer when most bank deposits in Japan pay virtually zero interest.

But the unit faces challenges beyond Thursday’s breakdown, including pressure to slash phone charges. SoftBank’s two main rivals plan to reduce charges by as much as 40%.

SoftBank is paring back its mobile-carrier holdings as Chief Executive Masayoshi Son focuses on running the Saudi-backed technology-focused Vision Fund, which last month said it secured more capital commitments to bring its total war chest to $98 billion. The Vision Fund has invested in some of the world’s most valuable startups including WeWork Cos. Inc.

SoftBank plans to give up control of U.S. carrier

Sprint
Corp.

if regulators approve

T-Mobile US
Inc.’s

acquisition of a controlling stake in Sprint. Meanwhile, the Dec. 19 IPO in Tokyo means the SoftBank parent will give up more than one-third of its Japanese mobile unit while raising some ¥2.65 trillion ($23 billion).

Shares of SoftBank Group shed 4.9% in Tokyo Thursday. Analysts said the high interest among retail investors in the mobile unit could cannibalize demand for the parent’s shares. About 90% of the IPO shares will be offered in Japan.

Also weighing on SoftBank was the arrest in Canada of the chief financial officer of SoftBank supplier Huawei for alleged violations of Iran sanctions.

SoftBank is conducting tests of high-speed networks with Huawei, using the Chinese telecom equipment maker’s lower-cost products to keep pace with network upgrades by bigger carriers NTT Docomo Inc. and

KDDI
Corp.

It also faces pressure from Japanese e-commerce company

Rakuten
Inc.,

which is preparing to enter the market with low-cost services.

Write to Mayumi Negishi at mayumi.negishi@wsj.com