Japan's SoftBank has reported a sharp drop in net income for the October-to-December quarter because of costs related to its $21.6 billion takeover of US mobile operator Sprint in 2013.

The operator, which competes against NTT DoCoMo Inc. (NYSE: DCM) and KDDI Corp. in its domestic market, said that net income shrank from 93.8 billion Japanese yen ($791 million) in the final three months of 2013 to just JPY32.3 billion ($270 million).

SoftBank Corp. has been laying off staff at Sprint Corp. (NYSE: S) to bolster profitability but revealed that severance costs had risen to JPY29.5 billion ($250 million) between April and December, from just JPY5.3 billion ($40 million) in the same part of 2013.

While the acquisition of Sprint weighed heavily on the bottom line, takeover activity boosted sales by 18.5% in the October-to-December quarter, to JPY2.33 trillion ($19.6 billion), compared with the same period of 2013.

In 2013, besides taking an 80% stake in Sprint, SoftBank also paid $1.5 billion for 51% of Finnish games maker Supercell and $1.26 billion for 57% of handset distributor Brightstar Corp. .

Brightstar's results were not included in SoftBank's 2013 results while figures from Supercell only showed up in the final two months of the year.

The operator also claims to have seen improvements at its domestic mobile business over the last nine months of 2014, highlighting growth in product sales, service revenues and the customer base.

Mobile Customers ('000) Source: Companies

SoftBank added 355,000 mobile customers in the final three months to give it 37.4 million in total, although average revenue per user (ARPU) fell to JPY4,250 ($35.90) per month from JPY4,490 ($37.85) in the same period of 2013.

The performance compared unfavorably with that of bigger rival NTT DoCoMo, whose customer base grew by 979,000 in the last three months of 2014 to 65.3 million. KDDI, which lags SoftBank in Japan's mobile market, also managed to outgrow it in the final three months, picking up another 635,000 customers to give it 35.6 million overall.

Monthly Mobile ARPU (JPY) Source: Companies

SoftBank CEO Masayoshi Son was keen to highlight the progress made by Sprint since early 2014, when Marcelo Claure was brought in from Brightstar -- a company that he founded -- to take over from Dan Hesse as CEO of the US mobile operator.

"Since Marcelo joined the net additions trend has been turning around and that's a good sign," Son told reporters during SoftBank's earnings presentation.

Sprint managed 30,000 postpaid net additions in the October-to-December quarter, having registered 272,000 net losses between July and September, although monthly postpaid ARPU tumbled to $58.90 from $64.11 in the last three months of 2013.

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The operator has struggled to keep pace with mobile giants AT&T Inc. (NYSE: T) and Verizon Wireless and is now being hotly pursued by number four player T-Mobile US Inc. , which aims to overtake Sprint on customer numbers in the next few months.

Last week Sprint said that its net loss had doubled to $2.38 billion in the October-to-December period, compared with the year-earlier quarter, with asset writedowns largely responsible for the deterioration.

On Thursday, SoftBank said it would not consolidate Sprint's impairment charge of $2.1 billion because it operates according to different accounting standards from its US subsidiary.

SoftBank still expects to make an operating profit of JPY900 billion ($7.6 billion) in its 2014/15 financial year, down from one of Y1.1 trillion ($9.3 billion) in 2013/14, having slashed the forecast by 10% during its previous earnings announcement because of Sprint costs.

 Iain Morris, , News Editor, Light Reading